Copper falls on rise in Shanghai inventories, dollar

Copper fell on Monday, extending last month's losses, as the dollar recovered and investors eyed an increase in Shanghai inventories, while zinc tracked renewed weakness in steel markets. Data on Friday showed copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 4.9 percent on the week, marking three consecutive weeks of gains.
"We had this tightness (in Shanghai copper stocks) but it seems to have eased. More broadly there's no compelling excitement (in copper), there's consensus that second half (growth) in China is going to be slower," said Vivienne Lloyd, analyst at Macquarie. Benchmark London Metal Exchange copper ended down 0.7 percent at $5,628 a tonne. Prices closed May down 1 percent, and have fallen every month this year save for January. The dollar lifted off seven-month lows hit on Friday in reaction to a weaker-than-forecast US jobs report, though the US currency still looked exposed going forward, analysts say. A stronger dollar makes dollar-priced metals costlier for non-US investors.
Activity in China's services sector expanded at the fastest pace in four months in May thanks to a surge in new orders, a private business survey showed, helping to offset worries about unexpected weakness in manufacturing. China accounts for roughly half the world's copper use. "We see further downside potential (in the second half). However while refined (copper) inventories remain high and Chinese demand appears to be slowing, outages in the concentrate market have capped the downside," said Barclays in a note. Freeport McMoRan Inc said last month that mining and milling rates at its Grasberg copper mine in Indonesia had been affected by an extended strike.
Hedge funds and money managers trimmed their net "long" or buy position in COMEX copper, US Commodity Futures Trading Commission data showed on Friday. Zinc, used to galvanise steel, closed down 1.7 percent in rings at $2,485 a tonne, having hit its lowest since mid-May earlier. Shanghai rebar ended 3.9 percent lower on Monday, marking eight consecutive days of falls, with traders brushing aside news of a new campaign to cut steel capacity in Tangshan. Nickel ended down 0.1 percent at $8,915, aluminium ended down 1.5 percent at $1,903, lead closed down 0.3 percent at $2,102 while tin ended down 0.8 percent at $20,145.