World Copper Price sinks to 3-wk low on profit-taking

Copper prices have fallen to three-week lows on profit-taking, rising stocks in London Metal Exchange warehouses, nervousness about demand in China and a higher US dollar.

Benchmark copper ended down 1.9 per cent at $US6,543 a tonne from an earlier low at $US6,529. Prices are up around 18 per cent so far this year, partly due to a speculative frenzy in July and August.

“It looks like profit-taking, we could see more of this before it settles,” Capital Economics senior commodities economist Caroline Bain said.

“China demand has surprised a little on the upside, but looking more closely at the data, construction has been contracting, that will drag on demand.”

Speculators: LME data shows funds’ net long copper position at 71,827 lots, or more than 1.8 million tonnes, is down from a peak of 78,527 lots late in August but still near its highest since last December.

Dollar: A higher US currency makes dollar-denominated metals more expensive for non-US firms, which could subdue demand from manufacturers.

Stocks: Copper stocks in LME approved warehouses are up 38,150 tonnes at 246,575 tonnes since last week.

Discount: Higher stocks and worries about an oversupplied copper market helped push the discount for the cash over the three-month contract to above $US40 a tonne, its highest since December 2009. Traders say this suggests more metal will be delivered over coming days.

Construction: China’s new property construction starts fell 7 per cent in July year-on-year, the first fall since last September. Real estate investment in China rose 7.9 per cent in January-July from the same period a year earlier, easing from 8.5 per cent in the first half of this year.

Data: Markets are looking ahead to data from China on new loans, investment and industrial production due this week for clues on the strength of demand over coming months.

Zinc Stocks: Stocks of zinc in LME warehouses are up 25,250 tonnes at 267,050. A small premium for the cash over the three-month contract on Sept. 4 has over the last week turned into a $US5 a tonne discount. Benchmark zinc was down 1.2 per cent at $US3,023.

Nckel: Nickel ended down 5.2 per cent to $US11,360. Earlier, it fell to a 3-week low at $US11,330 a tonne on talk of higher supplies from Indonesia, a top exporter.

Spread: The discount for cash nickel over the three-month at a 3-year high near $US90 a tonne also suggests large deliveries to LME warehouses, traders said.

Elsewhere: Aluminium was down 1.3 per cent at $US2,110, lead fell 0.9 per cent to $US2,290 and tin slipped 0.8 per cent to $US20,515.
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