WSJ:BASE METALS:LME Metals Mostly Lower In Asia; Await China Data
LONDON (Dow Jones)--London Metal Exchange base metals were mostly lower in Asian trading Monday as deteriorating sentiment and jitters about a possible tightening of Chinese credit conditions sparked a second day of heavy selling in the market.
At 0715 GMT, three-month copper was trading around $8,925 a metric ton, down $13 from Friday's settlement. Lead, which was leading Monday's losses, was down 0.9% at $2,521.75/ton.
Copper and aluminum benefited from low-volume buying activity in Japan early in the day, before falling as sellers had an upper hand amid thin trading volumes.
Many Asian traders held back from the market Monday as they waited for the release of Chinese inflation data expected Tuesday. Any suggestion from the data that the Chinese government will need to take further measures to tighten credit conditions in the country will be poorly received by the metals market, traders said. Tighter credit could slow growth in China's property and infrastructure sectors and reduce the demand for raw materials such as metals.
Chinese industrial production data, also due out Tuesday, could be another gauge of demand in the physical market, traders said.
Copper prices could fall as low as $8,700/ton this week if credit tightening measures lead to liquidation on the LME, a Tokyo-based trader said.
The contract has "solid support" at $8,900/ton, but any break below that level will spark fund liquidation, he said. "Today's financial sentiment and (copper) technicals are very weak," he said.
The trader said he expects the low-volume trading seen in the last fortnight to continue until prices fall to $8,500/ton, a level that will encourage more physical demand.
The pessimistic mood in the copper market was compounded by continuing concerns over the health of Chinese physical demand after May import data disappointed the market last week, a second Tokyo-based trader said.
"Since about a month ago, people have started to think that there is huge stock in the Chinese market," he said, attributing rising copper stocks in Asian bonded warehouses to selling by Chinese market participants. "Chinese selling is the reason why people aren't taking long positions in copper at the moment."
Inventories in LME-bonded warehouses rose by 75 tonnes to 477,925 tons Friday, with most of the metal arriving into terminals in Malaysia and the U.S.
Preliminary data from China's Customs Department released Friday showed May imports fell 3% on-month and 36% on-year to 254,738 tons. January-May imports fell 25% to 1.42 million tons. Imports fell partly due to narrowing arbitrage between LME and Shanghai Futures Exchange prices.
A stronger dollar is adding to the bearish mood in the market as dollar-denominated commodities become more expensive for buyers holding other currencies.. The dollar is trading at $1.4342 against the euro around mid-day, up from $1.4354 at the open.
Tin was the only one of the six base metals to post gains Monday, rising $20 from its previous settlement to $25,370/ton. Tin, which is used for applications including soldering and steel plating, remains well supported by its supply-demand fundamentals, Barclays Capital said in a report.
The house expects copper and tin to "markedly outperform once short-term macro worries and concerns surrounding Chinese demand dissipate," it said.
The following are LME three-month base metals prices at 0558 GMT and the changes from the previous PM kerb:
