RTRS:METALS-Copper dips on weak demand outlook in China
* China services sector data suggests struggling economy
* Shutdown of Freeport Indonesia copper mine supports prices
* Coming up: U.S. Factory orders at 1400 GMT
By Susan Thomas
LONDON, June 5 (Reuters) - Copper prices fell on Wednesday as concerns about
data suggesting top consumer China's economy is struggling to make progress
outweighed a shutdown at the world's second-largest miner of the metal.
Activity in China's services sector expanded last month but at a pace little
changed from the month before.
Three-month copper on the London Metal Exchange hit its highest
since May 22 at $7,480 a tonne, before trimming gains to $7,446 by 1019 GMT. It
closed at $7,455 on Tuesday.
But copper price losses were limited by reports that Freeport McMoRan Copper
and Gold Inc.'s Grasberg mine in Indonesia is likely to remain shut for
up to three months as the government investigates a tunnel collapse.
"There is some degree of support on the situation in Grasberg and I suspect
that's sparked some short covering, rather than anything more positive than
that," Citi analyst David Wilson said.
Prolonged closure could hit Freeport's ability to supply its customers and
global supplies of copper. Freeport has not said how long its stockpiles of ore
might last, but industry sources say large miners typically have three to four
weeks of ore stockpiled at port, and about three days on site.
Copper's reaction though has been muted, given that some 140,000-150,000
tonnes copper in concentrate will be lost if Freeport remains shut for three
months. Rio Tinto's Bingham Canyon mine closure could trim another 120,000
tonnes from the market.
But analysts still expect the copper market to be in surplus this year, and
demand for metal from China to remain weak.
"There is a sense that there is still a reasonable amount of copper in the
market place," Wilson said. "And there is China: I'm looking through data at the
moment, and housing completions have been fairly weak. It's not looking so
positive."
Attention now turns to exports, industrial output and retail sales data for
May due later this week, with expectations that these will also confirm the
weakness in the economy.
"Market participants are cautious ahead of Chinese economic data later this
week, with prices mainly reacting to news flow from physical markets," Credit
Suisse said in a research note.
Investors are also cautious before monthly nonfarm payrolls data due on
Friday as the U.S. central bank has made an improving jobs situation a
precondition for softening its strong stimulus measures.
A sooner-than-expected end to monetary support could undermine commodities
by pushing up the dollar and limiting liquidity available to investors.
Metal Prices at 1028 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2012 Ytd Pct
move
COMEX Cu 3.37 0.00 -0.06 365.25 -99.08
LME Alum 1969.25 23.25 +1.19 2073.00 -5.00
LME Cu 7436.50 -18.50 -0.25 7931.00 -6.24
LME Lead 2241.75 -0.25 -0.01 2330.00 -3.79
LME Nickel 15336.00 46.00 +0.30 17060.00 -10.11
LME Tin 20930.00 -95.00 -0.45 23400.00 -10.56
LME Zinc 1958.00 -4.00 -0.20 2080.00 -5.87
SHFE Alu 14960.00 120.00 +0.81 15435.00 -3.08
SHFE Cu* 53740.00 550.00 +1.03 57690.00 -6.85
SHFE Zin 14880.00 70.00 +0.47 15625.00 -4.77
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
