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Copper falls to 2-mth low on slowdown concerns

LONDON - Copper futures hit a 2-month low on Monday as rising inventories on the London Metal Exchange reinforced concerns that economic slowdown could dent demand.

Demand worries weighed on LME industrial metals across the board, hitting aluminium and lead particularly hard.

Copper for delivery in three months fell to $7,765 a tonne at 0954 GMT, its lowest price since June 5, compared with $7,900 at the close on Friday.

Copper stocks in LME warehouses rose 1,550 tonnes to 146,200, the highest level since Feb 26.

Softer demand for the metal used extensively in power and construction from Chinese buyers ahead of the Beijing Olympic Games is weighing on prices.

‘It's the start of Olympics week this week and we are not expecting anything material to take place in China for the duration of the Olympics,’ said Steve Hardcastle, analyst at Sucden.

‘The dollar is a touch weaker, which is marginally supportive, but people are turning their attention to the slowdown in activity in China.’

The dollar slipped from near a five-week high against the euro as oil prices climbed above $126 a barrel, ahead of a raft of central bank meetings this week.

ALUMINIUM DIPS

Aluminium dipped to $2,910.50 a tonne from $2,934, as LME stocks of the metal -- used in packaging, construction and transport -- grew to their highest level since May 2004.

Zinc fell to $1,810 a tonne, from $1,840, as LME inventories rose to the highest level since September 2006.

Zinc prices have lost about a fifth of their value since January as a supply glut worsened and mills that use the metal to galvanise steel slowed their purchases.

However, the world's second-largest zinc miner Oz Minerals Ltd said it expects world zinc prices to recover next year thanks to a looming supply shortfall, but a weak US dollar threatens any recovery for producers.

China abolished the 5 percent rebate on super-high grade zinc exports from Aug. 1.

‘Zinc demand is also soft. We hear there is a lot of unsold domestic material lying around. The change in taxes will only add to the domestic supply,’ said a Shanghai trader said.

Zinc and copper production from Peru, the world's second-largest producer of copper and zinc, rose last month.

The country said copper output rose 9.4 percent to 103,669 tonnes in June from the same month a year earlier and zinc production climbed 2.6 percent to 142,229 tonnes.

Tin fell to a 7-week low of $21,250 a tonne, from Friday's last quote at $21,500/21,550, but prices are still up almost 40 percent from a year ago.

‘Fundamentally tin is still very strong, except the tone of the market generally is weaker today and against that background tin is responding,’ said Sucden's Hardcastle.

Tin stocks rose 120 tonnes 5,490 on the LME.

Lead declined to $2,080 a tonne from $2,126, while nickel fell to $18,251 a tonne from $18,300.

Metal Prices at 0952 GMT

MetalLastChange Percent MoveEnd 2007

Ytd Percent

move

LME Cu7765.00-135.00-1.716670.0016.42

SHFE Cu*61020.00-420.00-0.6856880.007.28

LME Alum2910.00-24.00-0.822403.0021.10

SHFE Alu*18975.0015.00+0.0818180.004.37

COMEX Cu**358.00-4.85-1.34303.0518.13

LME Zinc1815.00-25.00-1.362370.00-23.42

SHFE Zinc*15125.00-130.00-0.8518950.00-20.18

LME Nick18200.00-100.00-0.5526350.00-30.93

LME Lead2075.00-51.00-2.402550.00-18.63

LME Tin21100.00-1100.00-4.9516400.0028.66 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07