SINGAPORE, Sept 13: London copper futures hovered near their lowest level in five weeks on Friday, heading for their third weekly fall out of four, on growing worries the U.S. Federal Reserve would start curbing its liquidity-boosting economic stimulus this month.
But the industrial metal held above $7,000 a tonne, a level it has only briefly broken below this year, on expectations demand from top consumer China and elsewhere in the world would pick up as the global economy regains footing.
Three-month copper on the London Metal Exchange was up 0.1 percent at $7,068.50 a tonne by 0704 GMT, after hitting a session low of $7,046.50. The contract hit $7,025 on Thursday, its weakest since Aug. 8.
The metal is down 1.3 percent for the week so far.
Investors are increasingly worried the U.S. Central bank will decide to cut its monthly $85-billion bond purchases from September at its policy meeting next week as it begins to end the era of cheap money that has boosted the flow of funds into commodities. Asian equities also retreated.
The Federal Open Market Committee is set to release a policy statement at the end of its two-day meeting next Wednesday.
But fears over the potential U.S. Stimulus tapering, that had weighed on prices for months, may have already been reflected in current asset levels, said Matt Fusarelli, an analyst at consultancy AME Group in Sydney.
Fusarelli sees copper at around $7,190 per tonne in the fourth quarter, supported by a global economy on the mend.
‘Better economic conditions in the second half of the year for China should support demand. But also we’re expecting a lot more demand coming out of markets like North America and even Europe but that’s a bit further down the track, probably first quarter next year,’ he said.
The most-traded December copper contract on the Shanghai Futures Exchange fell 0.7 percent to close at 51,290 yuan ($8,400) a tonne. It dropped 1.1 percent for the week, its fourth decline in a row.
Other analysts say any potential selling pressure when the Fed does decide to reduce its bond purchases may be fleeting.
‘Although we expect the sell-off to be brief, we still think that the short-term trend over the course of the next week will be lower, as markets adjust to the reality that the Fed is finally taking its first baby-step towards tightening,’ INTL FCStone analyst Edward Meir said in a note.
Investors are also keeping an eye on the global supply situation.
A strike that began last week at the small Salvador copper mine in Chile and owned by Codelco shows no signs of ending as the union has threatened more radical action after what it said was a lack of engagement from the company.
There is however unlikely to be any adverse impact on global flows. Salvador produced 62,700 tonnes of copper in 2012 – less than 4 percent of the total production of Chile’s state-owned Codelco, the world’s biggest copper producer.
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($1 = 6.1180 Chinese yuan)
(AGENCIES)
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