China worries drag down base metalsThu 17 May 2007, 11:53 GMT By...

China worries drag down base metals
Thu 17 May 2007, 11:53 GMT

By Humeyra Pamuk

LONDON (Reuters) - Industrial metals prices fell on Thursday, with copper dropping to a six-week low and dragging down the whole market on signs of oversupply in China, the world's top consumer of metals.

Copper for three months delivery on the London Metal Exchange touched $7,260 a tonne, its lowest since April 4, before bouncing back to $7,380 in the official session, still down by 3 percent or $230 from Wednesday.

Chinese imports would slow, metals analyst Michael Widmer said, adding: "They are going to remain as net importers but I would find it hard to believe that they will continue to import at the same pace."

China's imports of refined copper, anode and copper alloy in April stood at 205,053 tonnes.

That was down by 6.5 percent from March's record of 219,359 tonnes but exceeded expectations.

"Tomorrow, the Shanghai exchanges will release stock figures, and there is some apprehension that copper inventories, in particular, will be quite high," LME ring dealer MAN Financial said in a note.

Last week's data showed copper stocks in Shanghai Futures Exchange warehouses rose almost 20,000 tonnes between April 26 and May 10.

Widmer said a rise in LME inventories had added to selling pressure.

Copper stocks in London Metal Exchange warehouses jumped 1,600 tonnes on Thursday, taking the total to 142,700 -- still less than four days of global consumption.

"Copper is very, very expensive, especuially when there is not a shortage," an LME trader said.

World copper supply is likely to exceed demand by 270,000 tonnes in 2007, the International Copper Study Group said in a release.

NICKEL TIGHTNESS

Supply tightness in nickel weighed on spreads. The backwardation, the premium for cash material over three months, has almost doubled to $3,450 since late-April, its highest in almost three months.

Nickel for three-months delivery on Wednesday shed $1,250 to $49,200. The metal hit an all-time high of $51,800 earlier this month.

Stocks of nickel in LME warehouses edged down by 6 tonnes to 4,866, with available or on warrant stocks rising 24 tonnes to 3,954 -- around one day's global consumption.

Lead tumbled by 5.5 percent and touched $1,980 a tonne, before bouncing back to $2,010, still down 4 percent or $85 from Wednesday's close.

"A lot of the upwards pressure in the past few weeks was caused by short covering. Once those shorts are covered we see the prices easing," Widmer at Calyon said.

Zinc fell 5 percent to $3,650 and was at $3,675 in the official session while aluminium shed $53 to $2,795.

Cheers markco2

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