SINGAPORE, Oct 3: London copper futures steadied near $7,300 a tonne on Thursday as falling stockpiles of the industrial metal helped calm oversupply worries although a continuing shutdown of US government operations kept investors on edge.
Inventories of copper on London Metal Exchange warehouses <MCU-STOCKS> stood at 531,875 tonnes on Monday, the lowest level since March. In China, which consumes 40 percent of the world’s refined copper, stockpiles of the metal on warehouses overseen by the Shanghai Futures Exchange <CU-STX-SGH> were at 150,994 tonnes last week, the lowest since June 2012.
‘People may look at declining inventories in LME and Shanghai as a catalyst for prices going forward because it paints a healthy demand picture and is in contradiction to the market consensus of oversupply,’ said Helen Lau, senior metals analyst at UOB-Kay Hian Securities in Hong Kong.
Three-month copper on the London Metal Exchange stood at $7,272.75 a tonne by 0331 GMT versus Wednesday’s close of $7,279. The metal touched a one-week low of $7,142 in the previous session before recovering to settle 1.1 percent higher.
Chinese markets are closed for a third day for the National Day holiday, sharply cutting liquidity in Asia. They will reopen on Tuesday.
Copper traded on LME Select was a thin 338 lots, just a fraction of typical volumes around this time.
Lau said the shutdown of US government operations is also weighing on investor sentiment with no end in sight to the budget standoff between the White House and US lawmakers.
President Barack Obama met with Republican and Democratic leaders in Congress to try to break the deadlock, but there was no breakthrough and both sides blamed each other.
While China accounts for the bulk of global copper demand, the United States, Europe and Japan make up 30 percent, Lau said, and the outlook for the US and European economies remains uncertain which means copper consumption going forward may slow.
China’s own economy is not recovering as fast as many are hoping as evidenced by recent manufacturing activity gauges.
‘Given this situation, I think a more reasonable price for copper should be below $7,000,’ said Lau.
Copper prices have rebounded around 10 percent after hitting a three-year low of $6,602 in late June.
US private employers added 166,000 jobs in September, lower than the expected gain of 180,000, based on data released by payroll processor ADP on Wednesday.
The data, which reflected a still shaky employment market, may be the only US jobs data for September that investors will see this week if government operations don’t resume in time for the Bureau of Labor Statistics to release Friday’s nonfarm payrolls report.
(agencies)
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