Farallon Resources Ltd. (fka FRLIF)

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Zinc little changed, Copper May Decline for Third Day on Concern About Uneven World Economies

By Chanyaporn Chanjaroen - Aug 12, 2010 5:47 AM PT


Copper may fall for a third day in New York and London amid concern that uneven economies in China, the U.S. and Europe will crimp demand for industrial metals.

European industrial production unexpectedly declined in June, led by a drop in durable consumer goods such as home appliances, figures showed today. The pace of recovery in the U.S. is likely to be “more modest” than forecast, the Federal Reserve said this week, and figures showed that Chinese industrial output rose the least in 11 months.

“People are still worried about the economic outlook,” David Thurtell, a strategist at Citigroup Inc. in London, said today by phone. “The fear is overdone.”

Futures for September delivery were little changed at $3.2535 a pound at 8:30 a.m. on the Comex in New York, after gaining as much as 0.6 percent and sliding as much as 0.7 percent. Copper for delivery in three months rose 0.1 percent to $7,210 a metric ton on the London Metal Exchange.

Output in the economy of the 16 nations that use the euro dropped 0.1 percent from May, when it increased 1.1 percent, the European Union’s statistics office said today. Economists had projected a gain of 0.6 percent, the median of 32 forecasts in a Bloomberg survey showed.

Europe consumes 20 percent of global copper output and 15 percent to 25 percent of aluminum, zinc, nickel and lead production, according to Barclays Capital. Copper is among raw materials used by appliance makers such as Whirlpool Corp. and Electrolux AB.

Dollar Erases Slide

Copper also fluctuated as the dollar erased a drop. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, added as much as 0.6 percent. A stronger dollar makes metals priced in the currency more expensive in terms of other monies.

“Price weakness is also on the back of a dollar rebound,” Citigroup’s Thurtell said.

Copper is down 2.3 percent this year after more than doubling in 2009. Only nickel and tin have gained among the six main metals traded in the LME. The dollar index is up 6 percent in 2010.

“I think there will be further losses,” Thurtell said. He suggested buying copper at prices about 5 percent below current levels, or about $6,845 a ton for LME metal.

LME-monitored copper stockpiles expanded 0.7 percent to 409,075 tons after six declines in a row. Canceled warrants, or orders to draw metal from LME-registered warehouses, rose 2 percent to 21,900 tons.

12 Days of Usage

Including metal tracked by exchanges in Shanghai and New York, copper inventories totaled 604,344 tons, or about 12 days of global consumption based on Royal Bank of Scotland Group Plc’s estimate for demand this year of 18.2 million tons. That’s down from almost 14 days at the start of 2010.

Premiums to the LME cash price for copper paid by Chinese importers fell as low as $70 a ton on a cost, insurance and freight basis to Shanghai this week, according to Grace Qu, a consultant at researcher CRU in Beijing. That was the lowest since April.

“In a market that has become concerned again about an economic slowdown, these signals from the physical market may shake confidence and pressure prices again,” Barclays Capital analyst Gayle Berry in London wrote in a daily report.

Aluminum for three-month delivery on the LME rose 0.1 percent to $2,144 a ton and zinc was little changed at $2,037 a ton. Tin added 1.5 percent to $20,150 a ton, nickel fell 2.3 percent to $21,200 a ton and lead was unchanged at $2,065 a ton.

http://www.bloomberg.com/news/2010-08-12/copper-may-advance-on-london-metal-exchange-lifted-by-weakening-dollar.html