Resource News

Copper shines as gold loses lustre

Metals prices were mixed overnight in a lacklustre day of trading, although copper was a brightspot.

Copper rose for a second day in London on speculation that last week’s drop was exaggerated at a time when inventories of metal are at a seven-month low, indicating steady demand.

Stockpiles tracked by the London Metal Exchange fell for a 12th day today and have slid for 33 of the past 34 sessions. Bookings to remove copper from LME warehouses increased to the highest level in almost four months on July 1.

Copper for delivery in three months climbed $90, or 1.4 percent, to $6,500 a metric ton at 5:14 p.m. on the LME. The contract lost 5.3 percent last week. Futures for September delivery gained 0.7 percent to $2.9365 a pound on the Comex in New York.

LME prices last week dropped the most since the week ended June 4 as figures showed slower growth in manufacturing in China, the world’s top copper consumer. Auto sales in the country weakened in June and a services-industry index slid to a 15-month low, adding to signs that the economy leading the world recovery is cooling, reports showed today.

“The government-orchestrated slowdown in China” contributed to Citigroup Inc.’s decision to cut its forecast for copper prices in this year’s second half, analyst Alan Heap in Sydney wrote in a report today. He also cited “prospects of a stalled recovery in the developed economies (Europe in particular).”

Copper will average $3.10 a pound ($6,834 a ton) in the half, 15 percent below its prior estimate, Citigroup said. The metal will average $3.29 next year, 9 percent less than predicted previously, according to the report.

Concern about tighter monetary policy in China and the potential impact on demand of Europe’s fiscal crisis have helped to pull LME copper down 12 percent this year. Growth in Europe’s services and manufacturing industries slowed in June, Markit said, adding to signs a recovery is losing momentum.

The chance that Europe’s economy may return to recession “is rising fast and is at its highest since the recovery started more than a year ago,” Nick Moore, head of commodity strategy at Royal Bank of Scotland Group Plc, said in a report e-mailed today. “Absent an effective policy intervention to tackle the debt crisis in the periphery over the coming months, the European economy will double-dip in 2011.”

A composite index based on a survey of euro-area purchasing managers in both services and manufacturing fell to 56 from 56.4 in May, Markit said. An index of services retreated to 55.5 from 56.2. A gauge of euro-area manufacturing declined to 55.6 from 55.8 in the previous month, Markit said on July 1.

LME copper stockpiles fell to 444,500 tons, the lowest level since Dec. 2.

Nickel for three-month delivery on the LME slipped 0.3 percent to $18,744 a ton, erasing a gain of as much as 2.3 percent. Vale SA reached a “tentative” agreement for a new contract with workers in Canada who have been on strike for a year, the longest labor dispute in Vale’s 67-year history.

Aluminum was unchanged at $1,937 a ton and lead rose 0.4 percent to $1,760 a ton. Zinc climbed 1.6 percent to $1,808 a ton and tin rose 0.4 percent to $17,300 a ton…read more at the Kitco