US MIDDAY: copper slip

The price of copper slipped to an 8-1/2-week low below $3.30 a lb in early New York futures trade on Friday, as global liquidity issues continued to prompt investors to cut exposure in riskier commodity markets, traders and analysts said.
What began as problems in the US residential mortgage sector have now seeped into world financial markets as the fallout affected banks on a global scale, squeezing once-ample liquidity and threatening world growth potential.
The recent turmoil in the credit markets was now seen affecting copper's underlying fundamentals, with analysts noting a shift from former supply-side support to more demand-driven conditions in the near-term.
"For a long time, focus in metals has been primarily on the supply side of the equation. Instead, demand is now the variable that could warrant more attention in the weeks and months ahead; should it weaken in the wake of a credit-induced retrenchment, it could exacerbate the downward price spirals we are just starting to see in a number of commodity complexes," said Edward Meir, metals analyst with MF Global.
Copper for September delivery was off 3.40 cents to $3.3270 a lb by 10:36 am EDT (1436 GMT) on the New York Mercantile Exchange's COMEX division, after hitting an overnight low at $3.2850, its cheapest level since June 13.
Futures volumes were estimated at 9,170 lots by 10 am Larry Young, senior trader at Infinity Brokerage Services in Chicago, pegged near-term support in the benchmark September copper contract at $3.25. "Three twenty-five ($3.25) is the next target. There is major support at that level, so you should see fresh buying come in there if it can hold. But if we violate $3.25 the market will be in store for a nice sell-off," Young said.
In an effort to calm some investor nerves and provide extra liquidity to the market, the US Federal Reserve on Friday said it added $19 billion of temporary reserves to the banking system through three-day repurchase agreements.
"Liquidity squeezes of this sort should be relatively easily dealt with by central banks. Still, this crisis is apt to do significant damage well beyond the housing sector," said Alan Ruskin, chief international strategist with RBS Greenwich in Greenwich, Connecticut.
Overnight inventory data showed London Metal Exchange copper warehouse inventories fall 950 tonnes to 114,500 tonnes on Friday, while COMEX stocks held steady at 21,655 on Thursday. Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 1.7 percent to 89,968 tonnes in the week ended on Thursday, from 91,563 tonnes the previous week.
Meanwhile, Chinese imports of unwrought copper and semi-finished copper products continued their downtrend in July, dropping 2.7 percent from June, after stronger imports at the start of the year left the market flooded with material. July imports of unwrought copper and copper products totalled 206,830 tonnes, following on June's 3.7 percent decline.
In the first seven months of the year, imports of unwrought copper and copper products into China, the world's top consumer of the metal, rose 49 percent from a year earlier to 1.72 million tonnes, Customs said on its Web site (www.customs.gov.cn) on Friday. LME copper for delivery in three months last traded at $7,370 a tonne, down $65 from Thursday's close.