LONDON (Thomson Financial) – Copper prices dropped after a massive rise in stockpiles of the red metal at the Gwangyang warehouse in South Korea, indicating a decline in demand from China.
Copper prices have been underpinned by continued demand from the world’s largest consumer of the metal, as the base metals complex has been rocked recently by fears of a global economic slowdown in the wake of the US sub-prime crisis.
‘The great shining light for copper has been continued demand out in the Far East,’ said Sucden broker Steve Hardcastle. ‘Against the macro picture of the last few days, if China is temporarily not buying at these prices we are going to see support being stripped away.’
Copper inventories in London Metals Exchange (LME) monitored warehouses increased by a huge 8,675 tonnes to 114,275 tonnes, with the vast majority of those gains coming from Gwangyang.
At 11.38 am, LME copper for three-month delivery was trading down at 7,575 usd a tonne against 7,750 usd at the close yesterday.
Copper had risen slightly in Asian trade after the US Federal Reserve said the US economy would probably ride out the sub-prime mortgage defaults that have been weighing on equity markets and trader sentiment worldwide.
However, with the Fed holding interest rates at 5.25 pct, the dollar strengthened slightly making base metal prices higher for holders of other currencies.
‘Metal had been a touch weak ahead of daily LME stock data for no obvious reason, although a slightly firmer US dollar may have played a role,’ said UBS analyst John Reade.
Copper prices are supported by continuing strikes in Central America, with workers at three Grupo Mexico SAB mines vowing to continue their strike, despite having it deemed illegal by the Ministry of Labor.
In other metals, tin consolidated back to 16,500 usd a tonne against 16,755 usd, having hit an all-time high of 17,050 yesterday.
Lead eased to 3,100 usd a tonne against 3,146 usd. Lead production at Ivernia’s Magellan mine in Australia is still shut in on environmental grounds, while the strike at Exarro’s Rosh Pinah plant continues for now.
Nickel fell to 28,200 usd a tonne versus 28,900 usd at the close yesterday, following a 1,152 tonne increase in LME monitored stockpiles.
Zinc edged lower to 3,365 usd versus 3,380 usd, while aluminium slipped to 2,639 usd versus 2,664 usd at the close yesterday.
d.sheppard@thomson.com
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