Copper slips as oversupply looms, tight stocks cap fall

Reuters - Copper prices slipped half a percent on Thursday, weighed down by expectations of increased supplies later in the year, but signs of low availability for immediate consumption limited the decline.

Three-month copper on the London Metal Exchange ended at $7,310 a tonne, down from a last bid of $7,350 a tonne on Wednesday. It earlier hit a one-week high at $7,370.

The metal failed to gain traction from a fall in the dollar index, and increased its slide even after outgoing U.S. Federal Reserve chairman Ben Bernanke reaffirmed his belief in quantitative easing and long term forward guidance on interest rates.

Metals analysts said the market was looking at supply of refined metal, which is expected to grow sharply by the second half as mine output increases and smelting capacity ramps up.

"What we have in the two years ahead is substantial additional amounts of new mine supply coming on stream," said Nic Brown, head of commodities research at Natixis.

"There were a lot of smelter outages last year. But now we should see an increase in smelting capacities due to higher treatment and refining charges that will help to incentivise smelters to increase capacity."

Rio Tinto recorded big increases in production of iron ore and other minerals it sells mainly to China. Refined copper output from its Kennecott Utah Copper unit rose 19 percent in 2013, while mined copper was up 29 percent.

Price falls, however, were capped by concerns about a lack of short-term supply in the physical market due to low stockpiles of copper in LME warehouses and port strikes in the world's No. 1 copper producer, Chile.

Reflecting the concerns, cash copper prices have fetched a premium against three-month prices since December, trading at $28 at the close on Wednesday <CMCU0-3>.

Copper stocks in LME-registered warehouses have been falling steadily since September, and are at around one-year lows. <MCUSTX-TOTAL>

In the U.S. meanwhile, latest U.S. data on consumer prices, initial jobless claims and on home builder confidence pointed to an economy that continues to grow at a slow, but steady pace.

Also, a Reuters poll found the U.S. economy likely grew more quickly than previously forecast in the final months of 2013, putting it on track to accelerate this year amid sustained growth in housing and consumer spending.

Aluminium inventories in LME-registered warehouses climbed to a record of nearly 5.5 million tonnes on Thursday, more evidence of a market weighed down by oversupply.

Aluminium was undeterred by the stocks rise, ending at $1,798 a tonne, up from a close of $1,784 on Wednesday, and having earlier hit its highest since early January at $1,809.15 a tonne.

Nickel closed at $14,695 a tonne from $14,535, having earlier hit its highest since late October at $14,725 a tonne on persistent concerns about an Indonesian ban on exports of unprocessed ores.

Indonesia's nickel production will decline by 84 percent this year to 9 million tonnes compared to last year, the chief economic minister said on Thursday, as a ban on nickel ore hits output from the world's largest exporter.

Zinc closed down 0.34 percent at $2,074 a tonne, lead closed down 0.63 percent at $2,197 a tonne, while tin closed up 0.11 percent at $22,425 a tonne. All three metals hit their highest in about two weeks earlier.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

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Three month LME zinc

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Three month LME lead

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Three month LME nickel

Three month LME tin