SINGAPORE, Sept 12: London copper eased to its lowest in four sessions on Thursday on subdued buying ahead of the Federal Reserve’s stimulus decision next week, although Chinese demand put a floor under prices.
Copper prices have recovered more than 8 percent from three-year lows plumbed in late June, but have failed to gain traction above $7,420 a tonne, the top-end of their recent band and the highest in 10 weeks, hit in mid-August.
‘Even though (Chinese) copper demand is better than last year, we don’t expect very strong demand … Because even though some big sized semi producers or end users are reporting improving sales volume, a lot of smaller ones are experiencing falling demand,’ said analyst Chunlan Li of research firm CRU in Beijing.
‘The market is expecting a supply wave to come in … So given the potential supply pressure in the future, it will be difficult for prices to stay at high levels.’
Three-month copper on the London Metal Exchange slipped to $7,138, its lowest since last Friday, and was trading at $7,146 a tonne by 0217 GMT, down 0.33 percent from the previous session.
Prices are easing back towards the lower end of the recent range, challenging the floor of $7081.50 a tonne hit on August 30, which was the weakest in three weeks.
‘The market is tracking sideways and I think it will stay sideways until the FOMC – there is no real positioning in base at the moment,’ said a Singapore-based trader.
The most-traded December copper contract on the Shanghai Futures Exchange slipped 0.65 percent to 51,700 yuan ($8,400) a tonne.
The beginning of the end of the Fed’s determined support for the U.S. Economy is expected to come next week when top officials gather for one of the most highly anticipated meetings since the end of the Great Recession.
‘The ‘gearing’ is now more nuanced for either deferred commencement of ‘taper’ or for a ‘light-touch’ reduction in asset purchases by the Fed,’ Mizhuo analysts said in a note.
A slower reduction in bond buying could help support commodities which have been underpinned by extra liquidity available for industry as well as investors.
On the demand side, economic signals that China’s economy has found its feet are being mirrored in its copper consumption.
Chinese Premier Li Keqiang pledged on Wednesday to push ahead with reforms, with financial system change at the centre of his agenda, noting that the world’s second-largest economy was stable but there was a need to guard against risks.
Lower prices of copper enticed some Chinese buying, with premiums for copper in Shanghai bonded exchange rising $5 to $170-$200 a tonne, according to China price provider Shmet. (http://www.Shmet.Com/)
PRICES
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin ($1 = 6.1185 Chinese yuan)
(AGENCIES)
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