Bloomberg News

Copper Drops as Concern About Economy Offsets Supply Disruptions

June 08, 2011

June 8 (Bloomberg) -- Copper in London dropped for the first time in four days, as concern about an economic slowdown grew after Federal Reserve Chairman Ben S. Bernanke didn’t signal fresh stimulus even as the recovery slows, sending the dollar lower.

Three-month copper on the London Metal Exchange shed as much as 1.3 percent to $9,026 a metric ton before trading at $9,086.75 at 2:23 p.m. in Singapore. Tin gained 0.3 percent to $25,900 a ton after falling to $25,500, the lowest level this year. Aluminum, zinc, lead and nickel were little changed.

“Recent economic data have hurt near-term investor sentiment, however most people are still in agreement the fundamentals are still supportive,” Song Lu, an analyst at Soochow Futures Co., said from Shanghai today.

July-delivery copper on the Comex in New York fell for the first day in four, dropping as much as 1.5 percent to $4.0890 per pound. August-delivery metal on the Shanghai Futures Exchange lost as much as 1.3 percent to 67,350 yuan ($10,390) a ton.

Bernanke gave no hint of a new round of economic stimulus even as he called the recovery “uneven” and “frustratingly slow,” sending the dollar near a one-month low against the euro and yen.

Copper prices may have peaked this year because the market is “well-balanced,” according to JPMorgan Chase & Co. “There is cash metal available everywhere in China, and the market is well-supplied,” Michael Jansen, the head of metals research, said in an interview yesterday.

Copper Stockpiles

Inventories monitored by the Shanghai Futures Exchange rose for the first week in eleven last week, while stockpiles in LME Asian warehouses have climbed 30 percent since the end of March and yesterday stood at 193,125 tons.

“Bonded warehouse stockpiles are falling, however much of the metal is being rerouted to LME warehouses rather than absorbed by the physical market,” said Song. Chinese importers reroute metal to nearby warehouses when the price gap between London and Shanghai makes inbound shipments unprofitable.

Ongoing supply disruptions in Chile, the largest producer, may worsen an expected shortage this year, estimated by the International Copper Study Group to be 377,000 tons. Codelco, the world’s largest copper company, said the current cycle of high prices will last “a substantial amount of years.”

Codelco will miss its second-quarter production target as protests by contract workers disrupt operations at a mine in central Chile, Chief Executive Officer Diego Hernandez said in an interview yesterday.

The El Teniente mine is operating at 30 percent to 40 percent of capacity after most full-time employees stopped work when protesters threw stones at their buses on June 3, Hernandez said. Teck Resources Ltd. planned to restart its Andacollo copper mine in northern Chile yesterday after it was shut because of heavy rains, the company said.

--Editors: Richard Dobson, Jarrett Banks

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net


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