Shanghai copper slips 1.4 pct on LME stock rises

Shanghai copper futures fell 1.4 percent on Friday, under pressure from weaker London futures and rising international exchange stockpiles.

The most active April contract was down 750 yuan at 52,380 yuan ($6,751) a tonne at the close on Friday, and copper for delivery in three months on the London Metal Exchange was down $10 at $5,590 a tonne by 0739 GMT.

LME futures shed 2.35 percent on Thursday.

“The prospect of strikes and China’s re-stocking cannot resist a long-term fall in London and Shanghai copper as warehouse stocks in London continue to rise,” said Beijing-based Yu Quanxi, an analyst at Sinosteel Futures.

“I expect the warehouse stocks will reach 300,000 tonnes soon,” he said.

LME stocks rose 4,275 tonnes to 216,100 tonnes on Thursday and have doubled in the past 12 months.

“Copper is still focused on net inflows into terminal market warehouses and what that suggests in terms of demand and supply,” said Peter Richardson, chief metals economist at Deutsche Bank.

A strike vote at BHP Billiton’s 115,000 tonne-per-year Cerro Colorado copper facility in northern Chile earlier this week failed to boost sentiment, nor did a slight fall in Shanghai copper stocks.

Shanghai copper stocks were down 73 tonnes this week, despite market talk of ten of thousands of tonnes of metal entering China to take advantage of a substantial arbitrage.

Dealers said copper consumers, who are running on critically low inventories, may be picking up metal before it reaches exchange warehouses to re-stock and avoid shutting down when shipments are delayed.

Shanghai spot copper prices were down 900 yuan at 54,650 yuan to 54,800 yuan.

Nickel was down $150 at $36,700 a tonne.

Nickel dipped 3 percent at one point on Thursday after an agreement was reached in labour negotiations at the Sudbury, Ontario nickel operations owned by Anglo-Swiss company Xstrata , but prices recovered by the close of trade.

“We were struck by the fact after the strike had been averted and nickel sold off fairly heavily, it ended the day down less than half a percent,” Richardson said.

“That suggests the low stocks and the persistence of cancelled warrants are what is supporting the market,” the economist, who has been tracking metals for 20 years, said.

Stocks in LME warehouses were down 606 tonnes at 3,366, their lowest since 1991, while the premium for cash metal was a wide $2,725/2,825 a tonne above the benchmark future.

Of the total stocks, 918 tonnes are earmarked for delivery, leaving 2,448 tonnes to support the 1.4 million tonne-per-year market.

“Historically, whenever we saw such a high price and wide backwardation, we saw people delivering back to exchange,” a physical trader said.

“Stocks are down another 600 tonnes. Five more days of that and we are out of nickel.”

Nickel hit a record $38,950 last Friday.

The most traded April Shanghai aluminium futures contract rose to 19,510 yuan from 19,500 yuan.

LME aluminium was down $8 at $2,745, but the cash to three months spread was at a wide $114 backwardation.

“The backwardation suggests the big long is still in place. While that is the case, it will be supportive of a relatively strong cash price,” Richardson said.

“The issue is whether there is enough stock around that can be encouraged into warehouse by the backwardation to countervail the attempt to go higher.

Source: Reuters