Farallon Resources Ltd. (fka FRLIF)

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Zinc declines,Copper Drops, Paring Monthly Gain, on Concern U.S. Recovery Is Faltering

By Anna Stablum - Aug 31, 2010 5:03 AM PT

Copper fell in New York and London, paring a second monthly advance, before reports that may show a rebound in U.S. home prices slowed and consumer confidence near a five-month low, adding to concerns over the economic recovery.

In the U.S., the world’s second-biggest consumer of the metal after China, home prices in 20 cities rose 0.2 percent in June from the prior month, according to a Bloomberg survey, compared with a 0.5 percent May advance. Another report will probably show consumer sentiment little changed in August compared with July’s reading, which was the lowest since February.

“Copper is down, coming off after last week’s gains at the start of a macro-busy week and after a long weekend in London,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said today. “Economic uncertainty is creeping back in on expectation of bearish U.S. data this week.”

Futures for December delivery slid 6.3 cents, or 1.8 percent, to $3.3665 a pound at 7:28 a.m. on the Comex in New York. Copper for delivery in three months dropped 1 percent to $7,385.75 a metric ton on the London Metal Exchange. The London market was closed yesterday for a holiday.

The most-active contract on Comex is on course for a second monthly gain, up 1 percent after a 12 percent rise in July, the biggest monthly jump since July last year. “We will still trade off the broader market, but copper is actually not that bad,” said Kryuchenkov.

U.S. Data in Focus

Inventories of copper tracked by the LME dropped 3.6 percent this month, down for a sixth consecutive month, daily exchange figures showed. Stockpiles dropped 0.4 percent today to 398,525 tons, the lowest level since Nov. 11. Stockpiles have fallen 21 percent this year, on course for the first annual drop since 2004. Metal booked for delivery, or so-called canceled warrants, were little changed, down 0.1 percent to 30,250 tons, daily exchange data showed.

U.S. property values climbed 3.5 percent in June from the same month last year, down from a 4.6 percent gain in the 12 months to May, according to the median forecast of 21 economists surveyed by Bloomberg News. Construction accounts for a quarter of copper demand, according to the Copper Development Association. The home-price data from S&P/Case-Shiller are due at 9 a.m. in Washington. An hour later, consumer confidence data is due from the Conference Board, a New York-based research group. The sentiment gauge was little changed at 50.7 in August compared with 50.4 the prior month, according to the survey.

Another report, the Chicago Purchasing Managers’ Index due at 9:45 a.m. Washington time, may show its business barometer dropped this month to the lowest level since November, according to the survey’s median estimate.

Rising Demand

Aluminum for three-month delivery on the LME eased 0.3 percent to $2,051 a ton. The contango, cash aluminum’s discount to the three-month contract, widened to $14 a ton today from the prior session’s $13.25, according to LME data. The cash contract traded at a $2.25 premium to the three-month contract on Aug. 24, the highest since March 2007, according to LME data.

United Co. Rusal, the world’s largest aluminum producer, rebounded to a better-than-expected profit in the second quarter and forecast rising global demand, the company said in a statement today. Rusal, controlled by Oleg Deripaska, estimates global aluminum stocks will fall by up to 5 percent by the end of this year and continue to decline through 2011 and 2012, it said. LME inventories have dropped 4 percent this year to 4.44 million tons, according to daily exchange figures.

Nickel fell 1.7 percent to $20,700 a ton. The metal, mainly used in stainless steel, is forecast to average $21,000 a ton in the fourth quarter, Dan Smith, an analyst at Standard Chartered Plc in London said today in a report. A “revival of demand and increasing investor interest are positive for prices,” he said. However, global nickel supply is expected to increase in the second half of this year, in comparison with the first six months, keeping the market “broadly balanced,” Smith said.

Zinc shed 1.4 percent to $2,066.50 a ton, tin dropped 1.2 percent to $21,380 a ton, and lead slid 1.7 percent to $2,054.25 a ton.

http://www.bloomberg.com/news/2010-08-31/copper-drops-paring-monthly-gain-on-concern-u-s-recovery-is-faltering.html