FRX: Copper stalls ahead of $8,000 as dollar recovers
MARKETS-METALS (UPDATE 4, REFILE)
* Asian buyers avoid costly London copper, buy Shanghai
* Overall copper demand strong in Asia, supplies a concern
* Coming up: Chicago Fed national activity index, 1230 GMT
(Recasts, updates prices, adds comment, refiles to remove extraneous word "VALUE!" from table, updating prices in table)
By Maytaal Angel
LONDON, Sept 27 (Reuters) - Copper dipped on Monday, heading away from the psychological $8,000 a tonne mark, with a recovery in the dollar and limited Asian buying deterring investors, many of whom see prospects for further price rises. Benchmark copper for three-months delivery on the London Metal Exchange traded at $7,909 a tonne at 0946 GMT from a close of $7,945 on Friday.
Prices of the metal used in power and construction rallied to a five-month high of $7,990 a tonne last week.
The dollar recovered from five month lows versus the euro on Monday, as the single currency was knocked by renewed concerns over the euro zone banking sector. A stronger dollar makes dollar-priced metals costly for European investors.
Also weighing a little on copper, the discount in Shanghai copper to LME copper shot up to 1,546 yuan compared to 544 yuan last Tuesday, pushing Asian buyers away from the London market.
"There may have been selling overnight because of a closed arbitrage but the overall theme is still the same in that you've got relatively healthy demand from countries like China (and) supply for copper is growing at a slower pace than demand," said Merrill Lynch analyst Michael Widmer.
He added that while lacklustre economic growth in developed countries was a concern, the chances of a double dip global recession have lessened while developing nations are faring well and are key to metals demand.
The cash to three months spread in London copper moved into backwardation last week for the first time since August 2009, indicating supply in the global market is tightening up ahead of the year end.
STOCKS DWINDLE
LME copper inventories fell another 2,100 tonnes on Monday to 378,125, their lowest level since last November, down nearly one third from a six-year high hit in February.
"Copper, nickel and tin remain poised to benefit most from supply-side shocks in the coming quarters," Morgan Stanley said in a note.
The latest U.S. data gave mixed signals on recovery prospects, with new home sales flat in August, business spending plans rebounding strongly and durable goods orders down overall but showing some signs of strength. The market is now awaiting U.S. core inflation data for August on Friday, as well as purchasing managers indexes for a number of major economies including China and the euro zone.
"Given the state of the economy, I find it difficult to justify copper at $8,000. Supply is tight but if demand drops off again and we were to go into another weak period of growth, supply wont be tight anymore," said BaseMetals.com analyst William Adams.
Among other industrial metals, aluminium, used in transport and packaging, was at $2,304 a tonne from $2,317, lead was at $2,273 from $2,296 while zinc, used to galvanise steel, was at $2,211 from $2,248.
China's steel production cuts, which hurt iron ore demand and prices at the start of a usually peak season this month, will be in focus at this week's global steel and iron ore conference at the port city of Dalian.
Tin was flat at $23,600, still underpinned by ongoing supply constraints from top exporter Indonesia, and stainless steel ingredient nickel, bucked the trend, trading up at $23,080 from $22,875..
Metal Prices at 1107 GMT Metal Last Change Percent Move End 2009 Ytd Percent
move LME Alum 2308.00 -9.00 -0.39 2230.00 3.50 LME Cu 7915.00 -30.00 -0.38 7375.00 7.32 LME Lead 0.00 -2296.00 -100.00 2432.00 -100.00 LME Nickel 22900.00 25.00 +0.11 18525.00 23.62 LME Tin 23600.00 0.00 +0.00 16950.00 39.23 LME Zinc 2240.00 -8.00 -0.36 2560.00 -12.50 SHFE Alu 15930.00 205.00 +1.30 17160.00 -7.17 SHFE Cu* 60600.00 770.00 +1.29 59900.00 1.17 SHFE Zin 17950.00 145.00 +0.81 21195.00 -15.31 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Reporting by Maytaal Angel. Editing by Anthony Barker)
