Copper slipped after hitting its highest in 3-1/2 months on Friday, spurred by hopes that an improved outlook for the world's No 2 economy China may strengthen demand just as supply is tightening. Chinese importers are turning to purchases of refined copper for near-term delivery to Shanghai as banks tighten credit for buying from bonded stocks following a suspected metal financing scam at China's Qingdao port, trading sources said.
The increased demand has pushed up premiums of refined copper by about 20 percent over the past week, and could boost July imports of copper by the world's top consumer of the metal. "The outlook for industrial production and for the Chinese economy isn't as bad as everyone had feared. Beijing has really stepped up efforts to combat the slowdown and we've seen manufacturing numbers that are still pretty positive," said Sucden analyst Kashaan Kamal.
Three-month copper on the London Metal Exchange edged down 0.1 percent to close at $6,945 a tonne, having earlier hit $6,983.75 a tonne, its highest level since early March. A stoppage in ore shipments from Indonesia since January, as miners Freeport-McMoRan Copper & Gold Inc and Newmont Mining Corp renegotiate taxes on their exports with the government, has wiped out the year's expected global surplus.
"Given Indonesia's copper export mess, it looks to us like the market is going to be in balance or a small deficit this year," said Lachlan Shaw, analyst at Commonwealth Bank in Melbourne. The global refined copper market showed a 205,000-tonne deficit in the first three months of the year, compared with a 206,000-tonne surplus in the same period a year earlier, according to the International Copper Study Group (ICSG).
While copper mine supply has improved, it has not translated to a significant increase in available refined metal supply, Standard Bank said in a research note. Market losses were capped as many people remained optimistic about economic growth, including consumers in the United States, where sentiment rose in June, according the Thomson Reuters/University of Michigan's index, which rose more than expected.
In other metals, zinc ended 0.25 percent weaker at $2,185 a tonne but gained 6.4 percent for the month, boosted by bets on tightening supply given some deep mines such as Australia's Century are running out and LME stockpiles are at the lowest in more than three years.
Aluminium, which failed to trade in closing rings, was last bid down 0.69 percent at $1,884 a tonne, though it has gained about 6 percent this quarter, mostly on improved supply-side dynamics that have helped reverse the metal's years of underperformance. Nickel, mainly used in stainless steel, bucked the weaker trend and closed 0.37 percent firmer at $18,920 a tonne, but it shed 1.7 percent in the month, the first monthly loss in seven months. Battery material lead finished down 0.6 percent at $2,161 a tonne and soldering metal tin shed 0.56 percent to $22,300 a tonne.
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