Copper hits one-month low

Copper prices hit a one month low on Wednesday as a spate of poor US data highlighted concern about deteriorating economic growth prospects and demand in the United States, the world's largest economy. Battery material lead and stainless steel ingredient nickel hit $1,952 and $20,000 a tonne respectively - their lowest since late July on expectations of surpluses. Aluminium hit a one month low of $1,982.25.
Benchmark copper on the London Metal Exchange ended at $7,101 a tonne from $7,137 at the close on Tuesday. Earlier, the metal used in power and construction touched $7,028.25, its lowest since July 27. Denting sentiment, sales of new US single family homes fell in July, setting their slowest pace on record, while new orders for long-lasting US manufactured goods rose far less than expected.
"Weak housing is bad for base metals but it's also highlighting that we don't have a sustainable recovery yet," said Kristin Tuxen, an analyst at Danske Bank. Underlining the housing market's struggle to find its footing, data on Tuesday showed a fall of sales of previously owned US homes in July to their slowest pace in 15 years.
On the plus-side, LME copper stocks fell 1,400 tonnes to 402,425 tonnes - only about eight days of consumption. Stocks are down more than 25 percent since the middle of February. "There remain significant risks from a global slowdown, but we've had a good shakeout now and clearly there are shorts willing to book profits here," RBC Capital Markets said in a note.
Nickel stocks in LME warehouses rose 792 tonnes to 118,302 tonnes - about 30 days consumption. Latest stock number shows a gain of 3,000 tonnes since August 18. "There's a lot of nickel around, people thought the market would see a deficit this year, but that may not be the case," a trader said. Three-month nickel ended at $20,090 a tonne from $20,600 on Tuesday and lead at $1,961 from $2,013. Traders said news that the global lead market saw a surplus of 50,000 tonnes in the first six months of the year had also surprised as expectations only last month were for a small deficit.
Aluminium, used in power and packaging, ended at $2,003 a tonne from $2,028 on Tuesday, having earlier touched a one month low of $1,982.25 on worries of a large surplus this year, given growth in capacity and output. The spotlight was on the spread between LME aluminium to be delivered on Thursday and bought back on Friday - tom/next - often a way of lending material to the market.
The tom/next spread was at a small discount of around $0.50 a tonne from a premium on Tuesday. But traders say the story may still have some weeks to run as the significant long positions battle it out with the shorts. "The tightness in the spot market was primarily caused by the low availability of deliverable with a large bulk tied in financing deals," VTB Capital said in a note.
Financing deals are said to have tied up about 70 percent of LME aluminium stocks, which stand at above 4.45 million tonnes. They help banks earn higher returns than they would in money markets and release cash for producers. Worries about nearby supplies finally pushed the spread between the cash aluminium contract and the three-month contract into premium territory - around $2 a tonne from a discount from a contango above $30 a tonne in June. Eyes were also on large positions holdings of LME stock warrants and cash contracts on aluminium alloy, North American aluminium alloy, copper, nickel, lead and tin.
Concern of shortages of aluminium alloy has seen the premium for cash material over the three-month contracts to above $100 a tonne from a small discount in early July. Zinc ended at $1,964 a tonne from $1,991 on Tuesday and tin at $20,350 a tonne from $20,400. Zinc earlier saw $1,951 a tonne, its lowest since July 29.