Copper slips as low inventories offset growth fears

Copper slips as low inventories offset growth fears
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LONDON (Oct 8): Copper eased on Friday as concerns over the impact of higher power prices on global growth spooked investors, although losses were capped by low inventories in exchange warehouse which pointed to solid demand.

Benchmark copper on the London Metal Exchange (LME) shed 0.5% to US$9,235 a tonne in official trading but the metal widely viewed as a gauge of global economic health remained on track for a weekly gain.

Investors this week fretted over the economic impact of soaring energy prices and the prospects of faster than expected interest rate rises to combat inflation.

"The only cloud hanging over copper is a worsening macro picture, but the supply picture is so tight and that is preventing the copper price from going lower," said Gianclaudio Torlizzi, partner at consultancy T-Commodity.

Exchange warehouse stocks climbed but remained at low levels. Weekly copper inventories data for warehouses monitored by the Shanghai Futures Exchange showed a rise for the first time in eight weeks, increasing by 15% to 50,062 tonnes but still hovering around 2009 lows. 

In LME-registered warehouses, on-warrant stocks rose 3.7% to 85,875 tonnes, near their lowest since May. 

PAYROLLS: US employment increased far less than expected in September.

EVERGRANDE: Another concern for the copper market is potential contagion from the financial woes of Chinese property developer Evergrande. China's property sector is a major consumer of copper.

"Recent developments regarding Chinese property markets and the likely impact of the energy crunch on Chinese economic activity are clear reasons to believe that demand for copper will be weaker in the near term than had been anticipated," Jefferies analysts said.

However, global exchange copper inventories are down 23% since late August and the copper price was flat over that period, the analysts said.

OTHER METALS: LME aluminium fell 0.8% to US$2,921.50 a tonne, zinc added 2% to US$3,111.50, lead rose 1% to US$2,195, tin was up 1.7% at US$35,900 and nickel was down 3.3% at US$18,890.