Copper prices fell in Shanghai and London on Monday, adding to last week's 3 percent loss, under pressure from disappointing US economic data and a strengthening dollar. "The weaker data since last week's optimistic assessment of the economy by the Fed has prompted some investor reluctance to chase risk," said Ben Westmore, commodities economist at National Australia Bank.
He added that those investors were instead seeking shelter in the greenback, driving it up versus a basket of currencies and making dollar-denominated assets like commodities more expensive for other buyers. Three-month copper on the London Metal Exchange fell $105 to $5,885 a tonne by 0712 GMT.
Earlier prices blipped above $6,000 before giving way to hit a one-month low of $5,860. The 9 percent fall in September means the market is heading for its first monthly fall since December. "Chinese buyers will be sniffing around for metal at these numbers and buying would really take off as we get closer to $5,000. If prices were to fall away from those levels restocking would take off very swiftly," a trader in Singapore said.
Shanghai's benchmark third month copper contract fell 2.8 percent to 45,890 yuan. By comparison London prices were down 1.8 percent, widening the discount for Chinese material to 1,100 yuan from 450 yuan, taking into account China's 17 percent VAT. "We still expect some additional moderation in base metals given where we are in the restocking cycle, unless we start to see more significant drawdowns in inventories," NAB's Westmore said, suggesting a floor for LME copper at $5,600 to $5,700.
Fears that bullish fervour may have run ahead of the economic outlook were tempered by a fall in Shanghai copper stocks, which fell 5,559 tonnes to 98,689, their first decline since July. "People are waiting for a bigger price fall LME to $5,500-$5,600 and Shanghai down to 45,000 before they buy, They are also worried about a sudden move in London during the long holiday in China," a trader in Shanghai said.
Chinese markets are closed between October 1 and October 8 for the National Day and Autumn Festival holidays. Last year, a sharp sell-off in London during a week-long break in China disrupted markets for most of October as Shanghai traders, hobbled by the daily limit system, struggled to catch up with a free-fall in the international market.
LME aluminium fell 1.4 percent to $1,790, on track for its biggest monthly loss since January. Japanese shipments of aluminium products fell 18.7 percent in August from a year earlier to 138,920 tonnes. That was also down from 166,610 tonnes in July, the Japan Aluminium Association said.
Metal demand, which halved during the worst of the downturn, had been showing a nascent recovery as demand returns, particularly among automakers. In industry news, Russia's Rusal, the world's top aluminium producer, has re-started plans to list part of its business on the Hong Kong exchange, with hopes of raising around $2 billion, according to a source familiar with the matter.