Copper prices down

Copper prices edged lower on Wednesday, pressured by a rise in the dollar against the euro and concerns about growing supplies in the market, though prospects of fresh monetary policy measures in Europe and China limited falls. Three-month copper on the London Metal Exchange (LME) ended at $6.630 a tonne, down 0.6 percent, after a 1.6 percent gain in the previous session, its biggest one-day rise since August 20.
Prices are still down some 9 percent this year. The dollar extended broad-based gains after data showed a slight uptick in September US CPI data, a 0.1 percent rise versus a mean forecast of no change, in a move that pushed US Treasury yields up which supported the dollar. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.
Helping to limit falls in metals prices was a rise in European shares, seen by some as a proxy for economic growth, driven by upbeat company earnings results and the hopes of corporate bond buying by the European Central Bank. The European Central Bank is considering buying corporate bonds on the secondary market and may decide on the matter as soon as December with a view to starting purchases early next year, several sources familiar with the situation told Reuters.
This, coupled with prospects of further policy fine-tuning in China - the world's largest copper consumer - and more evidence of US economic growth momentum, is buttressing metals prices. "There could be a bit of optimism going into the fourth quarter. Demand from the China State Grid Corp could come back, but it would not be a massive turnaround. Mine supply is still increasing around the world," said Patrick Jones, a metals analyst at Nomura.
Illustrating copper supply growth that has loomed over prices, China's refined copper output rose a monthly 4.9 percent in September, hitting record levels as new smelting capacity was met by an increased supply of raw materials. Also, the global world refined copper market showed a 77,000 tonne surplus in July, compared with a 63,000 tonne deficit in June, the International Copper Study Group (ICSG) said on Tuesday in its latest monthly bulletin.
However, for the first seven months of the year, the market was in a 589,000 tonnes deficit compared with a 22,000 tonnes surplus in the same period a year earlier. Based on expectations for a surplus next year, most respondents to a poll by Macquarie of its metals clients were happy to bet copper prices would fall. "Copper is now the favourite short for the first time since the global financial crisis, on strong supply growth," Macquarie said. "The results also show a large swing in participant preference towards nickel, despite weak recent performance."
In the United States, meanwhile, latest data showed existing home sales raced to a one-year high in September, a further indication the housing market recovery is gradually getting back on track. Many metals executives have flown to London for an industry gathering this week, leaving desks in Asia low staffed and draining liquidity from the market. LME nickel closed 0.6 percent lower at $15,210 a tonne, having fallen to its weakest in more than seven months on Tuesday at $15,080 a tonne.
LME nickel prices had rocketed more than 50 percent by May after top exporter Indonesia banned ore shipments in January, leaving China's vast stainless steel industry short of supply. But record LME stockpiles and a move by China's mills to supplement their stocks with Philippine ore have pared year-to-date gains to around 8 percent. Aluminium rose 1.1 percent to close at $2,012 a tonne, having earlier hit its highest in a month at $2,015.75 a tonne. Aluminium has gained some 11.5 percent this year on tighter supply and improved demand.
Aluminium producer Norsk Hydro reported third-quarter earnings above expectations on Wednesday and predicted the sector's first supply deficit since the start of the global financial crisis. Zinc rose 2.2 percent to close at $2,259.50, lead ended 0.7 percent higher at $2,044 and tin rose 0.3 percent to end at $19,500.