LONDON – Copper lost six per cent to reverse earlier gains yesterday after a source said China’s State Reserves Bureau (SRB) could have suspended planned copper purchases and rising stockpiles increased worries about demand.
Copper for three month delivery on the London Metal Exchange (LME) fell to a low of US$3 196 a tonne from US$3 400 at the close on Friday but was last at US$3 240.
‘We previously had a plan to build up copper reserves but it now seems we’ve had to suspend it,’ said an official with knowledge of the Chinese government’s plans.
‘It’s because of the price,’ he said, without elaborating.
Prices of copper, the metal used in power and construction have fallen about 60 per cent since a record high of US$8 940 in July 2008. However, they have risen about 4,7 per cent so far this year, on speculative buying due to index re-weighting.
Investors were largely covering positions both ahead of index re-weighting but also because of the speculation on whether SRB will be re-stocking and by how much,’ said Gayle Berry, an analyst at Barclays Capital.
Copper stocks rose 5 925 tonnes to 369 500 tonnes – its highest level in five years.
‘China, the world’s largest metal consumer, discarded a plan to buy copper to support domestic smelters because producers are still profitable and inventories aren’t high,’ UBS analysts said in a note.
China’s State Reserves Bureau, which has already bought aluminium and indium, is scheduled to meet representatives of five or six large smelters for a zinc bidding round, part of its plan to buy base metals to help loss-making smelters and boost consumption, industry sources said yesterday.
Zinc was at US$1 244,75 from US$1 295, while tin drifted US$300 lower to US$11 500 a tonne.
In other markets, European shares fell in early trade to track a sell-off on Wall Street on Friday, while US crude slipped to under US$39 a barrel.
Aluminium fell 3,1 per cent to US$1 521 compared with a low of US$1 516, from US$1 570 on Friday. The metal used in transport and packaging has come under pressure in recent weeks on news of falling car sales data from car makers.
LME stocks jumped 15 650 tonnes to 2,42 million tonnes – its highest level since September 1994 and a reminder of weaker demand for the metal.
Nickel shed more than 14 per cent to a near two-week low at US$10 350 from US$12 175, while lead was down 5,8 per cent at a low of US$1 135,50 from US$1 205 but was last at US$1 150.
Nickel has now fallen around 80 per cent since its all-time high of US$51 800 in May 2007.
In the week ahead, investors will eye Chinese and US trade numbers.
-Nampa-Reuters
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