Shanghai copper lower after growth warning

Shanghai copper lower after growth warning

Shanghai copper futures fell 1.4 percent on Friday as China’s top planner warned that the country’s growth rate was still too fast.

The most active March contract was 1.4 percent lower at 54,020 yuan ($6,929) a tonne at the close on Friday, versus 54,800 yuan on Thursday.

The Chinese economy grew by 10.5 percent in 2006 according to initial data, the fourth year running of double-digit increases.

Ma Kai, head of the National Development and Reform Commission, said in a report on the agency’s Web site that policy had succeeded in helping to ease problems of overcapacity, but the foundations for reining in credit and investment were not solid enough.

Earlier on Friday, Standard Bank, London said China, which consumes about one-fifth of the world’s copper would remain the key driver for base metals prices.

“The belief that China will restock its copper supplies this year, the fact that aluminium exports may be reduced reflecting increased export tariffs, the prediction that stainless steel demand will maintain nickel consumption and China will move to being a net exporter of zinc all weigh significantly on forecasts,” it said.

In 2006, China’s imports of copper fell 18.6 percent to 2.06 million tonnes as international prices and growing domestic output reduced import demand. [ID:nPEK231155]

But Chinese consumption was ticking up and imports in the first quarter were expected to rise.

Spot copper prices in Shanghai were down 1,250 yuan, and quoted between 57,200 yuan and 57,500 yuan.

“Copper futures are still supported by the strong cash market in China, as spot copper supply remains tight in eastern China,” Zheng Heng, an analyst at Jinrui Futures said.

But he said that though Chinese consumers were booking material for after the Lunar New Year, if London Metal Exchange prices rebounded above $6,300, that metal would be diverted into warehouses.

Copper for delivery in three months on the London Metal Exchange fell 1.8 percent to $5,795 a tonne at 0828 GMT, from $5,900 at the close on Thursday.

Standard Bank said that from a technical perspective, although copper would see a degree of selling while prices held above $5,655, prices could extend to $6,125.

“These levels are highlighted as initial trigger points, with a breakout targeting $5,500 and $6,335, respectively.”

Nickel futures were down $400 at $33,100. On Thursday, nickel jumped almost 8 percent to $34,900, within $50 of its December all-time high, but pared those gains by the close.

Nickel prices have doubled over the past 12 months on falling stocks, tight supply and strong demand.

The limited availability was reflected in the premium for cash metal above the benchmark futures contract at $1,750/1,950 per tonne, up over $1,000 since the start of the year.

March Shanghai aluminium futures eased to 19,810 yuan from 19,830 yuan, while LME aluminium lost $22 to $2,723.

The cash to three months backwardation narrowed slightly to $71/81 a tonne, from a six-year high of around $80 on Thursday.

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