Copper Falls On Economic Concerns, Dollar.

Copper fell more than one per cent on today as the dollar rebounded from one-month lows and a bleak Federal Reserve assessment of the US economy depressed market sentiment.

Federal Reserve Chairman Ben Bernanke late on Tuesday acknowledged the economy had slowed but offered no hint the US central bank was considering any more stimulus to accelerate growth.

Benchmark copper on the London Metal Exchange was down 1.03 per cent to $9,046 a tonne by 1003 GMT from $9,140 a tonne at the close yesterday.

Earlier, the metal used in power and construction hit the lowest in almost a week at $9,026 a tonne.

“Growth is slowing. Momentum is slowing,” said VTB Capital analyst Andrey Kryuchenkov, adding that the Fed comments only underlined what was evident from bearish data published last week.

The dollar recovered from a one-month low against a basket of currencies but was still under selling pressure across the board on the view that a slow US economic recovery will keep interest rates low well into next year.

A stronger US currency makes dollar-priced commodities costlier for holders of other currencies.

Looking at fundamentals, the copper outlook seemed to be slowly improving, Kryuchenkov said.

“It seems like in China things are getting a bit better. Inventories are going down, which is ok, but I want to see LME copper in backwardation first.”

Copper was in a $13.30 contango, discount for cash over three-month material, compared with a $70 backwardation — premium for cash over three-month material — in December last year.

A backwardation generally suggests near-term demand exceeds supply.

ALUMINIUM INVENTORIES
Aluminium was in a $22-contango from a $22.5 backwardation on May 13, which attracted hefty volumes of the metal into LME warehouses last month.

Inventories of aluminium hit a record high of 4,711,875 on May 17 but have since started to soften.

The latest data showed a 7,800-tonne slump, which dragged aluminium stocks down to 4,660,050 tonnes, their lowest in four weeks.

The metal, used in packaging and transport was at $2,679.25 from $2,686 at the close yesterday.

Higher electricity prices and worries of possible production cuts due to power disruptions have supported aluminium prices better than other metals, said Metal Bulletin Research analyst Kamil Wlazly.

“We believe the negative balance of electricity cuts is likely to be on the semi-fabricator (consumers) side, as in order to maintain economic growth and provide more job positions, local governments are likely to continue to favour aluminium smelters, which have been long perceived as provincial economic pillars,” Wlazly said.

On the demand side, the long-term outlook for aluminium is sound, analysts said.

“The industrialisation and urbanisation of emerging economies and the substitution of aluminium for other metals (e.g. copper) will ... drive aluminium demand in the long term, particularly given its lightweight, fuel efficient and recyclable properties,” said Nomura in note.

Tin was at $25,701 from $25,825.

Earlier it hit its lowest since December 2010 at $25,500.

At the beginning of the year tin was well supported by falling supply from Indonesia.

“But now supply is more or less adequate and inventories are also ok,” Kryuchenkov said. “It is a better supplied market than earlier this year.

Zinc, used in galvanizing steel was at $2,268 from $2,272 and battery material lead was at $2,531 from $2,548.

Nickel was at $22,510 from $22,625.

Source : Sify.com