Shanghai Copper Ticks Down on Demand Woes, LME Steady

SHANGHAI, June 11 -- Shanghai copper edged down on Thursday, with investors hesitant to buy into the recent price rally, fearing a downward correction in prices on weak fundamentals, while London copper stayed firm.

    The recent price rally in base metals has been partly boosted by economic data showing positive signs of the recovery in the global economy, in addition to a weak dollar.

    China's foreign trade fell more sharply in May, underscoring warnings that China's economy recovery is not yet on solid ground despite robust investment spending, while its copper imports rose to a new record of 422,666 tonnes in May.

    "We are probably around the peak, and looking ahead, the worry is prices have risen too fast too early," said Mark Pervan, a senior analyst at ANZ Bank.

    "The level of imports going forward will depend on price differentials which have closed up recently. Also June and July are usually pretty slow for metals demand, so don't expect more records."

    The benchmark third-month Shanghai copper futures contract fell 0.2 percent to 41,610 yuan a tonne by the midday break, and the most-active contract for September delivery fell less than 0.1 percent to 41,700 yuan.

    "Domestic investors are lagging behind in buying into the rally, and are eager to sell once prices rise higher. London, on the other hand, has attracted a lot of funds," said Lin Yuhui, deputy general manager of Jinhui Futures Co.

    Copper contract for three-month delivery on the London Metal Exchange gained $20 to $5,200 a tonne, easing from $5,264 hit in the previous session, a near 8-month high.

    Falling LME copper inventories supported the bullish sentiment.

    Stocks slid 2,075 tonnes to 294,275 tonnes on Wednesday, their lowest since early December.

    But cancelled warrants, or material tagged for delivery, fell to 29,075 tonnes, or less than 10 percent of total tonnage, compared to about 18 percent a month earlier, sending signals of slowing demand.

    "At some point in the next few months, we will probably see metals prices take a step backwards again. But at the moment, the sentiment towards metals remains positive. So given the momentum that's in place, you couldn't rule out the possibility of some near-term gains," said David Moore, commodities strategist at Commonwealth Bank.

    Technicals also support copper's bull run at least in the short term.

    "The short to medium term technical outlook remains clearly bullish with the recent re-consolidative phase confirmed to be complete and the past 3 months upward cycle to have resumed," brokerage Newedge said in a technical note.

    LME aluminium was flat at $1,645 a tonne, retreating from the $1,701 hit in the previous session, its highest since Dec. 2 last year.

    (Source: Reuters)