Shanghai Copper and Zinc Fall on LME Correction

SINGAPORE, Aug. 17 -- Industrial metals prices dipped on Monday under pressure from profit taking after soft U.S. consumer confidence data and a surge in Shanghai copper stocks to a two-year high.

    Shanghai copper and zinc both fell by their 5 percent daily limits and aluminium was also sharply down, while London copper futures fell more than 2 percent, adding to Friday's 2.4 percent loss when the market slid from 10-½ month highs.

    "It was all a bit too fast and a bit too easy and the whole market was ready for the correction," a dealer in Sydney said.

    "Copper seems to be holding $6,000 for now, but that may face pressure later in the day when we get new data."

    A weaker-than-expected read from the Reuters/University of Michigan Survey of Consumers and a 20 percent surge in weekly Shanghai copper stocks to 76,107, their highest in two years, ignited Friday's cross-market sell-off.

    U.S. and European stocks dropped on Friday and oil started the week 0.8 percent down at $67 a barrel, having shed $4 on the numbers of Friday that showed Americans grew increasingly worried over jobs and wages.

    Traders said a deep retracement could see copper back to the low- to mid-$5,000s, but others said long-term investors were still buying on dips and that would limit the downside.

    "Long-term players are buying the dip, if you can call $6,100 a dip. I see support between $5,800 and $6,000, which would be a return to the previous ranges," a trader in Singapore said.

    The market is expected to turn to New York factory data for August at 1230 GMT and a raft of housing data due later on Monday and on Tuesday for direction.

    Shanghai third-month copper fell 2,520 yuan from Friday's settlement to 47,790 yuan a tonne. The benchmark London Metal Exchange contract for delivery in three months lost 2.5 percent to $6,085 at 0320 GMT.

    "The market has come up a long way so there is potential for some short-term weakness, but fundamentally, we remain positive. We are seeing selling from Chinese accounts." Barclays Capital analyst Yinggxi Yu said.

    "I think this is profit taking and positioning after the run-up."

    Copper prices have jumped 23 percent since the end of June have risen every month this year.

    Shanghai zinc fell 760 yuan from Friday's settlement to 14,375 yuan a tonne on Monday, but later recovered to 14,450.

    LME zinc lost 1.1 percent to $1,805.

    LME tin was the only metal in the black, up $75 at $14,525.

    Tin has been the subject of a squeeze in recent months, with cash premiums flaring towards $800 above cash prices. On Monday the spread was around $500 backwardation.

    (Source: Reuters)