METALS-Copper hits 1-week low on Chinese probe talk

Trade the News

Friday September 10, 2010 01:27:19 AM GMT

* Talk of Chinese probe into rubber mkt triggers sell-off

* Zinc loses as much as 6.5 percent

* Coming up: U.S. wholesale inventory data for July on Fri

(Recasts, updates with New York closing copper price, adds New York dateline/byline)

By Chris Kelly and Humeyra Pamuk

NEW YORK/LONDON, Sept 9 (Reuters) - Industrial metals were hit hard on Thursday, with zinc suffering its biggest one-day loss in 2-1/2 months and copper sinking to its lowest in a week, after talk of a Chinese investigation into trading on the Shanghai rubber market slammed investor sentiment.

The base metals complex never fully recovered from the abrupt sell-off in the first two hours of Shanghai trade, as news about the China probe sparked fears the investigation could spread to other markets.

"The concern is that this could happen in other commodities or is already happening," said an LME trader. "If that's the case and if you're long, you'd rather take the profit and move out now."

London Metal Exchange zinc shed $66 to close at $2,153 a tonne, after tumbling earlier 6.5 percent to $2,075.25 a tonne.

"Zinc open interest is down 50,000 lots. It looks like someone was dumping zinc, taking profits and met no buyers, and it spread to the rest of the market," a trader in Shanghai said.

Copper for December delivery on the COMEX metals division of the New York Mercantile Exchange fell 5.70 cents, or 1.6 percent, to end at $3.4435 per lb, its lowest level on a closing basis since Aug. 31.

LME copper for three months delivery was last bid at $7,554 a tonne in closing kerb trades, versus $7,675 a tonne on Wednesday.

Prices did manage to bounce away from a earlier session low of $7,460 a tonne, its lowest since Sept. 1.

"For the next couple of weeks, prices could move lower on the potential of this investigation but ... we're (still) looking for copper to move through $8,000 a tonne this year," said John Meyer, an analyst at Fairfax.

"Asia, led by China, is seen as continuing to show strong growth, and there are some indications of further tightening in the copper market."

U.S. demand for the red metal was also showing some signs of strength.

Data from the United States International Trade Commission on Thursday showed copper imports rose for a fourth straight month in July.

(Graphic: http://link.reuters.com/mes52p)

SOLID FUNDAMENTALS

Copper trimmed some of its initial losses, however, as equity and currency markets provided some support.

U.S. equities headed higher after lower-than-forecast jobless claims and trade deficit numbers brightened prospects for economic growth.

Also, the fundamental picture for copper looked solid, with LME inventories standing at 393,375 tonnes, having fallen from 6-1/2 year highs at 555,075 tonnes in mid-February.

(Graphic: http://link.reuters.com/zat52p )

Aluminum was last bid at $2,105 a tonne versus $2,160 on Wednesday. LME stocks of the metal dipped 5,150 tonnes to remain near record levels at 4.41 million tonnes.

Nickel ended at $22,750 from $22,900.

Lead ended at $2,201 from $2,234, while tin ended at $21,700 a tonne from Wednesday's $21,675 a tonne, having earlier hit $21,800, its highest since August 2008.

Tin, the LME's top performer, has been driven up in recent months as stocks retreat, demand steadies and supply constraints continue in top exporter Indonesia. Metal Prices at 1855 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2009 Ytd Pct

move COMEX Cu 344.60 -5.45 -1.56 334.65 2.97 LME Alum 2100.00 -60.00 -2.78 2230.00 -5.83 LME Cu 7555.00 -120.00 -1.56 7375.00 2.44 LME Lead 2160.00 -74.00 -3.31 2432.00 -11.18 LME Nickel 22595.00 -305.00 -1.33 18525.00 21.97 LME Tin 21600.00 -75.00 -0.35 16950.00 27.43 LME Zinc 2140.00 -79.00 -3.56 2560.00 -16.41 SHFE Alu 15490.00 -195.00 -1.24 17160.00 -9.73 SHFE Cu* 58600.00 -1210.00 -2.02 59900.00 -2.17 SHFE Zin 17550.00 -520.00 -2.88 21195.00 -17.20 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Additional reporting by Nicholas Trevethan in Singapore; and Maytaal Angel in London; Editing by Lisa Shumaker)

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