May 25, 2012 / 12:45 PM / in 5 years

Copper up on euro rebound; seasonal slowdown eyed

LONDON (Reuters) - Copper was up half a percent on Friday, boosted by a euro rebound against the dollar and bargain-hunting after it hit 4-1/2-month lows this week, but analysts said that a seasonal slowdown may mean prices could fall again before summer.

A worker checks a shipment of copper inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, about 164 km (101 miles) northwest of Santiago, April 16, 2012. REUTERS/Eliseo Fernandez

LME copper was not traded in official rings, but was quoted at $7,654 a metric ton (1.1 ton) up half a percent from a $7,610 close on Thursday. Prices hit the lowest since early January at $7,503 this week and were set to close little changed.

A euro rebound from near two-year lows helped ease pressure on the complex, ahead of a long weekend, and in the absence of fresh developments over a potential Greece departure from the euro zone, analyst Robin Bhar of Societe Generale said.

“There’s the currency factor and it’s a long holiday weekend in the U.S. and Germany so obviously players are covering any exposed short positions, plus there’s the usual concerns that we’re not going to get any clarity until the Greek elections,” he said.

Worries about the fate of Greece’s euro membership remain in focus after an opinion poll found the anti-bailout leftist party SYRIZA maintaining its lead ahead of the June 17 election.

“As for copper demand, European consumers are pretty well covered, and we’re heading into a seasonal slowdown. So it does beg the question, will prices find it difficult staying at these levels by mid to end June it could be a struggle,” he added.

Top consumer China’s appetite for metals tends to be strongest March to May, while European industry and to a lesser extent that in the U.S., will start to shutter from next month for the summer holidays.

“European consumers have done all their spot buying and we’re approaching summer - there won’t be much to come in and support prices,” a London trader said.

Parts of Europe including Germany and Switzerland, as well as the U.S. will be shut for Whit Monday or Memorial holidays on Monday.

This week’s rout in commodity markets has pushed prices of aluminum, zinc and nickel down near year to date lows, where many high-cost producers are starting to suffer, although the pain threshold may have to increase before widespread closures help balance markets.

The global copper market for refined copper was in a 110,000 metric ton (121,254 tons) deficit in February versus a 46,000 metric ton deficit in February 2011, the International Copper Study Group (ICSG) said late Thursday.

CHINA COPPER

Tightly held inventories of copper in China underpinned prices, as owners feel able to sit on their inventories to wait for a price recovery, said ANZ in a note.

“We think a cautious approach about the near-term prospects for the copper market is justified on the basis of sour sentiment in China and Europe, but concerns about Chinese inventories are probably a little over done,” it said.

“Bonded stocks in Shanghai would appear to be tightly held and not subject to large-scale liquidation on price falls. So while elevated copper stockpiles still pose a risk, it may not be as great a threat as they first appear.”

ANZ estimates Shanghai bonded stocks at 650,000 metric ton or above.

Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 9.4 percent or 16,325 metric ton from last Friday, to 157,489 tonnes, the latest data showed.

Tin was not traded but was bid at $19,800 from $19,970 while zinc, used in galvanizing was at $1,898 from $1,886 on Thursday’s close.

China is likely to boost imports of zinc in the fourth quarter of the year after Beijing said it would speed up infrastructure investment, market players said, helping support prices for the base metal.

Battery material lead was at $1,958 in rings, from $1,955 and aluminum was at $2,019 from $2,015. Nickel was untraded but bid at $17,050 from $17,075.

Editing by William Hardy and Alison Birrane

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