Make Kitco Your Homepage

METALS-Profit-taking weighs on copper, dollar supports

Kitco News

* China's year-to-date copper imports down

* Falling LME stocks and dollar weakness offer support

(Adds ECB comments on monetary policy and closing prices)

By Pratima Desai

LONDON, Sept 7 (Reuters) - Copper prices softened on Thursday as doubts about the strength of demand in top consumer China triggered profit-taking, though declines were kept in check by a weaker dollar on receding expectations of an imminent rise in interest rates.

Benchmark copper on the London Metal Exchange ended down a touch at $6,898.5 a tonne from Wednesday's close at $6,901. The price had touched a three-year high of $6,970 this week, representing a gain of nearly 25 percent so far this year.

"The dollar has been a major tail wind. Chinese demand isn't bad, but it is being overestimated. Look at data on non-tradeable materials like cement, where demand growth is still low," said Liberum analyst Richard Knights.

"One influence has been the Chinese regulator pushing wealth management products towards commodities."

WEALTH: China said in June it will encourage wealth management firms to invest in commodity futures to promote its domestic derivatives industry and raise Chinese funds allocation to commodities. DOLLAR: A lower U.S. currency makes dollar-denominated metals cheaper for non-U.S. firms, which could eventually boost demand. This relationship is used by funds to generate buy and sell signals using numerical models. ECB: The dollar extended losses against the euro after the ECB reaffirmed its ultra-easy monetary policy stance and kept the door open to increasing bond purchases. DEMAND: China accounts for nearly half of global copper demand estimated at about 23 million tonnes this year.

SCRAP: Optimism in the copper market surged in July after news of a Chinese proposal to ban imports of some scrap metal from the end of 2018. "While the details are vague, we understand it is targeted at category 7 scrap, which includes low-grade copper scrap such as electric motors or metallic hardware," said ANZ analysts.

"China imported about 3.3 million tonnes copper scrap in 2016. We believe a majority of this would be in category 7. However, due to the low grade, its share is closer to 25 percent on a contained-copper basis. This should see import demand of refined copper remain strong over the medium-to-longer term."

IMPORTS: China's imports of refined copper rose nearly 13 percent to more than 283,000 tonnes in July, but the year-to-date total is down more than 21 percent to about 1.83 million tonnes. INVENTORIES: Also supporting prices are falling stocks of copper in LME-approved warehouses. At 210,725 tonnes, inventories are down more than 40 percent since early May. PRICES: Aluminium closed up 0.1 percent at $2,107 a tonne, zinc gained 1.1 percent to $3,129, lead slipped to $2,340 from $2,341, tin fell 0.2 percent to $20,750 and nickel ceded 0.1 percent to $12,150.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Top base and precious metals analysis - GFMS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by David Goodman, Greg Mahlich)

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Precious Metal Charts

Follow Kitco News