Adam Sarhan Reuters Quote: METALS-Copper crumbles amid Chinese demand doubts

Wed Mar 30, 2011 3:20pm EDT

* Copper sinks as Chinese demand worries mount

* Copper stocks in China, LME warehouses in the spotlight

* U.S. copper runs into technical support at 100-day MA

* Coming up; Chinese manufacturing data Friday

(Recasts, updates with U.S. copper closing, adds graphic,

analyst comments and NEW YORK dateline/byline)

 

By Chris Kelly and Rebekah Curtis

NEW YORK/LONDON, March 30 (Reuters) – Copper prices ended

sharply lower on Wednesday, on pace for their biggest monthly

decline since June 2010, as weaker demand cues from China and

fears about a moderation in the global economic recovery kept

many bulls sidelined.

 

Chinese monetary tightening measures, coupled with unrest

in the Middle East, rising oil prices, euro zone debt problems

and Japan’s nuclear crisis have all combined to throw the

magnitude of the global economic recovery into question, and

with it, demand for raw materials.

 

As a result, copper prices have responded, falling more

than 12 percent from their mid-February peaks at $10,190 per

tonne in London and $4.6575 per lb in New York, before

recovering to stand in aimless ranges at quarter’s end.

“From a fundamental standpoint, it’s leading a lot of

people to question whether or not they want to remain long

copper going into a new quarter,” said Adam Sarhan, chief

executive of Sarhan Capital in New York.

 

London Metal Exchange copper for three-month delivery

CMCU3 dropped $209 to close at $9,381 a tonne, on track for a

5 percent fall in March, its first monthly decline since June

2010.

U.S. copper HGK1 followed suit, extending a downtrend in

place since mid-February before running into some technical

support near its 100-day simple moving average.

 

It settled down 7.25 cents at $4.2740 per lb.

Trading volumes began to perk up, with more than 47,000

lots traded by 2:24 p.m. EDT (1924 GMT). This was the first

time volume topped 47,000 lots since March 17, according to

preliminary Thomson Reuters data.

 

“All the bets were put on China,” said Eugen Weinberg, an

analyst at Commerzbank. “Sentiment in China is not as rosy and

not as upbeat as sentiment in Europe or the U.S.”

That being said, attention will now turn to Chinese

manufacturing data on Friday, where market participants will

see if the country’s vast manufacturing sector will recover

from the six-month low hit in February. [ID:nL3E7ET1H8]

“Are they going to maintain the growth, given that the auto

sector is in doubt and imports are trending lower,” asked Bart

Melek, vice president and director of commodities, rates

research & strategy with TD Bank Financial Group. “It’s

expected to move up by consensus a bit, but, if it’s a

disappointment, watch out.”

 

Despite the more cautious Chinese outlook, Jiangxi Copper

Co Ltd (0358.HK)(600362.SS), the country’s largest copper

producer, expects China’s consumption to rise by 10 percent to

12 percent this year and plans a 60 percent rise in its own

production capacity by 2015. [ID:nL3E7EU1D3]

Even data showing strong hiring by U.S. private employers

failed to give the market a boost, as investors awaited

Friday’s closely watched government report on non-farm

payrolls. [ID:nN30275708]

 

TRADITIONALLY STRONG QUARTER

Traders and analysts are waiting to see what will happen in

the second quarter, traditionally the strongest in terms of

demand, when China normally buys ahead of a pick-up in

construction activity in the third quarter.

 

“Anecdotally, something in the region of 600,000 tonnes of

refined copper currently (sits) in bonded warehouses in

Shanghai, with perhaps another 100,000 tonnes in the southern

ports,” Standard Bank said in a note.

 

Also in the spotlight are LME stocks of copper, which added

225 tonnes on Wednesday, bringing total warehouse levels to

439,725 tonnes, their highest since last July. <0#LME-STOCKS>

In other metals, aluminium CMAL3 came within $2 of

Tuesday’s session peak at $2,656 per tonne, its highest since

September 2008, before ending down $19 at $2,629.

Metal Prices at 3:48 p.m. EDT (1948 GMT)

COMEX copper in cents/lb, LME prices in $/T and SHFE prices in

yuan/T

Metal Last Change Pct Move End 2010 YTD Pct

move

COMEX Cu 426.85 -7.80 -1.79 444.70 -4.01

LME Alum 2629.00 -19.00 -0.72 2470.00 6.44

LME Cu 9380.00 -210.00 -2.19 9600.00 -2.29

LME Lead 2655.00 -30.00 -1.12 2550.00 4.12

LME Nickel 26025.00 -575.00 -2.16 24750.00 5.15

LME Tin 31225.00 -525.00 -1.65 26900.00 16.08

LME Zinc 2335.00 -40.00 -1.68 2454.00 -4.85

SHFE Alu 16835.00 5.00 +0.03 16840.00 -0.03

SHFE Cu* 71300.00 470.00 +0.66 71850.00 -0.77

SHFE Zin 18375.00 95.00 +0.52 19475.00 -5.65

** Benchmark month for COMEX copper

* 3rd contract month for SHFE AL, CU and ZN

SHFE ZN began trading on 26/3/07

(Additional reporting by Pratima Desai in London; Editing by

Walter Bagley)

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