Shanghai metals down

Shanghai metals fell more than 1 percent on Tuesday, following a near 3 percent slide in London copper overnight weighed down by soft oil, a firm dollar and worries about Chinese demand. US crude prices have fallen over 5 percent since Friday after Hurricane Gustav appears to have spared the US Gulf energy sector serious damage, while the dollar rallied to its highest this year against a basket of currencies.
"There was no data out of the United States on Monday because of the holiday, but numbers out of France, Germany, Russia and China all look weak," MF Global analyst Edward Meir said.
Data showing weak German retail sales, a shrinking European manufacturing sector, falling Russian energy exports and softer Chinese purchasing managers indices all pointed to slower demand for industrial raw materials. "I am bearish on commodities and I think we will see $100 for crude and the high $6,000s for copper by October. The slowdown is spreading and the dollar looks like a better and better place to be," said Meir.
Shanghai November copper fell 1.4 percent to 57,300 yuan ($8,396) a tonne at the close, around its lowest in two weeks, while London Metal Exchange three-month copper lost $65 or 0.9 percent to $7,240 after shedding more than $200 on Monday.
But traders said prices were nearing levels that might entice Chinese buyers, who have been unusually quiet this year. "Chinese players aren't going to get involved with copper above $7,200," a dealer in the region said. "Chinese urbanisation will continue for the next 30 years and consume vast amounts of metal, but if prices are too expensive they are happy to postpone buying."
Worries about slowing growth in China were reflected in the benchmark Shanghai Composite Index which neared a 20-month low of hit in mid-August. But Barclays Capital said although things were cooling, the economy remained strong.
"Growth is slowing, but we are not headed for a hard landing. Real growth in consumption remains strong and fixed asset investment growth has also held up well," said Wensheng Peng, an economist with Barclays Capital in Hong Kong. The discount for third-month Shanghai copper futures versus the benchmark London contract, including China's 17 percent VAT, was steady at 730 yuan, from 1,163 yuan on Monday. The discount shrank to 716 yuan on August 13, its narrowest since March.
Gustav's softened blow also weighed on zinc prices. With New Orleans currently housing around 61,000 tonnes, or 38 percent of LME zinc, traders had feared another round of flooding similar to Hurricane Katrina three years ago could cut off supplies. "This hurricane was pretty touch and go. People were so scared after what happened three years, but the storm ultimately fizzled and it looks like the Big Easy dodged a bullet," Meir said.
LME zinc fell $34 or 1.9 percent to $1,741 after shedding 2.3 percent on Monday. Shanghai November zinc fell 2.1 percent to 14,045 yuan. Shanghai November aluminium lost 1.5 percent. LME nickel fell a modest $50 to $19,150, fall further after Monday's 5 percent slump in the wake of a big delivery of metal. LME stocks rose by 1,206 tonnes or 2.6 percent to 48,228 tonnes, their highest in around three months.