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Copper Slides for a Second Day before U.S. Home-Price, Confidence Figures
Sep 29,2010 09:44CST
industry news

Sep 28 (Bloomberg) -- Copper fell for a second day in New York and London before a report that may show cooling house prices in the U.S., the world’s second-largest user of the metal.

Property values in 20 cities increased 3.1 percent in July from a year earlier, below the 4.2 percent gain in the 12 months to June, according to the median forecast of 28 economists surveyed by Bloomberg News. Separate figures may show consumer confidence in the U.S. weakened.

"Good U.S. consumer-confidence and house-price data are crucial for metals and other risk assets to avoid further losses today,” said David Thurtell, a Citigroup Inc. analyst in London.

Copper for delivery in December dropped 1.8 cents, or 0.5 percent, to $3.579 a pound at 8 a.m. on the Comex in New York. Copper for delivery in three months slid 0.6 percent to $7,861 a metric ton at on the London Metal Exchange. All of the six main metals traded on the LME retreated except tin.

The S&P/Case-Shiller home-price figures are scheduled for release at 9 a.m. in Washington. Construction accounts for a quarter of copper demand, according to the Copper Development Association.

A report from the Conference Board due an hour later may show its index of consumer confidence slipped to 52.1 from an August reading of 53.5, according to analysts surveyed by Bloomberg.

Dollar Movement

Prices slid as the euro weakened against the dollar before rebounding. Metals "tracked the dollar so far today, coming under pressure during the morning before stabilizing,” Leon Westgate, an analyst at Standard Bank Plc in London, said in a report. A stronger U.S. currency makes dollar-priced metals more expensive in terms of other monies.

Signs of stronger German consumer confidence suggested that debt concern was "not affecting consumers in Western Europe’s largest economy,” Citigroup’s Thurtell said. Market researcher GfK AG said today its index of German consumer sentiment will rise to 4.9 from a revised 4.3 in September.

At the same time, consumer confidence fell to the lowest level in 14 months in South Korea, the Bank of Korea said. The country is the fourth-largest copper user after China, the U.S. and Germany.

"Over the last few months, the economic outlook has been unusually uncertain,” leading physical users of industrial metals to defer buying, Tobias Merath, an analyst at Credit Suisse Group AG, said in a report yesterday. "Now local stockpiles are depleted and consumers are buying again in the market,” he said.

Wider Contango

Immediate-delivery copper’s discount to the three-month price, the so-called contango, widened to $4 a ton from $2.50 yesterday, according to LME figures. The gap was as wide as $16 as of Sept. 15. A shrinking discount for near-term prices in relation to longer-dated contracts may signal concern about scarcity.

"The futures curve is flattening, particularly at the front end, suggesting that physical availability is gradually drying up,” Merath said. "Accordingly, supply growth is unable to keep up with demand, leading to a further tightening of the market balance.”

LME copper stockpiles fell for a second day to 375,275 tons, the lowest level since Nov. 4, daily exchange figures showed. Inventories posted a 31st weekly drop in a row last week and have slid 25 percent this year, on course for the first annual contraction since 2004.

Tin Climbs

Orders to draw copper from inventories, or canceled warrants, slid for a fifth day, declining 4 percent to 23,300 tons.

Tin for three-month delivery on the LME rose 0.5 percent to $23,760 a ton. The metal is this year’s best LME performer, up 40 percent, beating the 23 percent advance by closest rival nickel. LME inventories dropped for a third day to 13,500 tons, the lowest level since May 13, 2009, and down by almost half since the start of this year.

Cash tin yesterday traded $2 above the three-month contract, the market’s first so-called backwardation since Sept. 1. Immediate-delivery metal was at a $14 discount to the three- month price on Sept. 23.

Nickel slid 1 percent to $22,850 a ton. Cash metal’s backwardation compared with the three-month price yesterday swelled to $27 a ton, the widest level since Sept. 1, 2009, according to LME data. Immediate-delivery nickel was at a discount of $8 as recently as Sept. 22.

Aluminum fell 1.1 percent to $2,269 a ton, lead dropped 0.8 percent to $2,251 a ton and zinc declined 1.7 percent to $2,170 a ton.



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