WSJ:BASE METALS: LME Metals Mostly Lower In Choppy Asian Trade
SINGAPORE (Dow Jones)--London Metal Exchange base metals mostly fell in Asian trading Wednesday, after the market came under pressure from a stronger dollar and amid jitters over potential further monetary tightening in China.
Volumes were low and trading was choppy, with many traders staying out of the market ahead of a statement from the Federal Open Market Committee statement and U.S. Federal Reserve Chairman Ben Bernanke's press conference later in the global day.
Three-month copper was trading at $9,044.75 a metric ton at 0705 GMT, down $35.25 from its previous settlement.
Prices fell as the dollar rose against the euro early in Asian trading. Dollar-denominated investments including metals are more expensive to investors holding other currencies when the greenback strengthens.
The base metals also took direction from concerns that Beijing may once more tighten its monetary policy to cool inflation, a Singapore-based copper trader said.
China's National Development and Reform Commission said the increase in China's consumer price index will likely be higher in June than in May. The inflation rate is still controllable, China's top economic planner said Wednesday, but investors are nervous about the potential for more policy tightening that could curb bank lending to metals buyers, the trader said.
"It looks like it's likely [the copper market in] China will not be picking up like we thought, so that's dragging the market down," she said, noting a lack of buy orders from her clients in Wednesday's trade.
After digesting the news that Greek Prime Minister George Papandreou's government survived a vote of confidence late Tuesday, investors are waiting to see the outcome of the FOMC meeting before taking new positions, she said.
Bernanke is expected to announce that the Fed's $600 billion bond-buying program will end on schedule this month. The program has helped increase liquidity in U.S. and global markets, helping support relatively high base metals prices.
In the medium-term, consumers and traders are hoping the metal markets will make a substantial move down before they come in to buy large volumes, the trader in Singapore added.
"Everyone is looking for a move lower; investors are waiting for the downside to come," she said, although traders peg strong support for copper at $8,900/ton and then at $8,800/ton.
Chinese consumers in particular are reluctant to take large long positions with prices above $9,000/ton, said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
He expects Chinese buyers will restock at prices closer to $8,300 or $8,400/ton.
Drawdowns from LME-bonded warehouses in South Korea last week had stoked hopes that some Chinese buyers were restocking, but Singapore-based traders disputed this, saying the metal was leaving Busan and Gwangyang for delivery at the Shanghai Futures Exchange.
The appearance of more available stock could narrow the wide nearby backwardation on the SHFE, traders said. A backwardation occurs when the cash price is higher than the prices further out.
September copper was trading at a CNY300/ton discount to the August contract in Shanghai, compared with a discount of CNY190/ton at the beginning of the month.
LME copper stocks stood at 472,825 tons Tuesday, up 975 tons from Monday.
The following are LME three-month base metals prices at 0705 GMT and the changes from the previous PM kerb:
