Copper falls to six-week lows, focus on US rates

Copper prices slipped to six-week lows on Tuesday on market jitters over the timing of US interest rate rises, dollar direction and strength of demand in top consumer China. Benchmark copper on the London Metal Exchange ended down 0.8 percent at $4,710 a tonne, from an earlier $4,701.5, its lowest since July 11. A higher US currency makes dollar-denominated commodities more expensive for non-US firms, a relationship used by funds to generate buy and sell signals for industrial metals.
Markets are looking ahead to the Kansas City Fed's 2016 Economic Symposium in Jackson Hole from Thursday to Saturday and a speech from Fed Chair Janet Yellen on Friday, which could influence expectations for US monetary policy this year. "People are looking for clues from the Fed, but I would say Jackson Hole is not as important as when Ben Bernanke used the meeting to hint at major changes in policy," said SP Angel analyst Sergey Raevskiy.
"Probably the most important thing is economic news from countries like China, which tells us what demand is doing." China accounts for about half of global consumption estimated at around 22 million tonnes this year. Recent data suggested weakness in July and potentially in the second half of the year. Also undermining copper this week has been rising stocks, which in LME approved warehouses have risen nearly 30,000 tonnes to 240,075 tonnes since August 17. But this may not be the start of an upward trend, analysts say.
According to the International Copper Study Group (ICSG), in its latest monthly bulletin, the copper market saw a deficit of 222,000 tonnes in the first five months of the year. ICSG said the deficit in May narrowed to 65,000 tonnes from a shortfall of 144,000 tonnes in April.
"While the monthly deficit has reduced it is still a deficit and we expect an ongoing gradual erosion of inventories, providing price support into 2017 and beyond," Investec analysts said in a note. Zinc rose one percent to $2,302. Worrying the market is a large LME position, holding 40-49 percent of zinc warrants and cash contracts. This, traders say, is behind the premium, of around $2 a tonne, for the cash contract over the three-month future for the first time since late May. Three-month aluminium was up 0.1 percent at $1,669, lead gained 0.4 percent to $1,861, tin added 0.9 percent to $18,700 and nickel was flat at $10,260.