Copper prices rose on Monday as the market focused on falling inventories, supply constraints and strong economic growth in China, the world's largest consumer of industrial metals. Benchmark copper on the London Metal Exchange ended at $7,250 a tonne from $7,156 a tonne at Friday's close.
The metal used in power and construction touched a high of $7,288 as the dollar slipped against the euro following a below-consensus reading of the New York Federal Reserve Bank's "Empire State" manufacturing activity index. A weak US currency makes metals priced in dollars less expensive for holders of other currencies. Copper saw a low of $7,178 in early Europe time as the market digested news of weak gross domestic product (GDP) growth in Japan, one of the world's largest economies.
Also helping copper prices were supply constraints - one reason why analysts expected the copper market to be balanced or see a small deficit this year. China was estimated to account for more than 30 percent of copper demand, forecast at about 19 million tonnes this year. A Chinese government think-tank said last week that its economy would cool further this quarter as fiscal pump-priming starts to fade and the restocking cycle draws to a close.
It said annual growth would slow to 9.2 percent from 10.3 percent in the second quarter and 11.9 percent in the first. Stocks of copper in LME warehouses at 406,700 are down about 25 percent since the middle of February when the number touched 555,075 tonnes, the highest since October 2003. Tin stocks in LME warehouses have more than halved to 13,940 tonnes since late January, and nickel inventories were down nearly 30 percent to 117,012 tonnes.
Tin closed at $21,100 a tonne from $20,750 at the close on Friday, and nickel, an ingredient in stainless steel, ended at $21,550 from $21,275. Bolstering tin prices was the news that refined tin output from Indonesia, the world's largest exporter, might fall by 20 percent from a government target of 105,000 tonnes as unseasonably long rains hamper mining.
Worries about near-term supplies have pushed the market into backwardation - a premium for cash material over the three-month contract of $200 a tonne. That compared with a small discount or contango last week. The spotlight in the aluminium market was also on spreads between different contracts.
Supply concerns have seen the contango between the cash and three-month contract narrow to around $7 a tonne from $26 in late June. The premium for material to be delivered in August against that for September is around $12 a tonne. In late July that number was nearly zero. The three-month aluminium contract ended at $2,118 a tonne from $2,110 on Friday. Earlier it touched $2,105 a tonne, its lowest since July 30.
However, the metal used in transport and packaging has been boosted by financing deals, which have tied up about 70 percent of LME stocks - at around 4.37 million tonnes. Also a plus have been plans to launch physically backed aluminium exchange traded products. Battery material lead closed at $2,095 a tonne from $2,057 on Friday and zinc at $2,073 from $2,047.
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