Copper ticks lower, Gustav supports zinc

Tag : zinc
China - * Copper markets edge down; tight stocks in China support
* Zinc market eyes Gustav progress towards LME warehouses
* Chinalco sees Chinese aluminium prices around 18,000 yuan(Updates prices, graphic, adds details)
By Nick Trevethan
SINGAPORE, Sept 1 (Reuters) - Copper futures ticked lower in Londonand Shanghai on Monday as investors weighed rising internationalstocks and worries about demand against the prospect of short-termre-stocking of low Chinese supplies.
Chinese zinc prices gained and London futures held steady as themarket cast a worried glance over weather forecasts, whichsuggested Hurricane Gustav could threaten London Metal Exchangewarehouses in New Orleans.
Shanghai November copper fell a modest 0.2 percent or 130 yuan to58,540 yuan a tonne by midday. Copper stocks in Shanghai fellnearly 20 percent last week to their lowest in more than threeyears, supporting the domestic physical market.
"Spot prices are holding around 60,000 yuan so futures aren't goinganywhere," a dealer in Shanghai said.
"Even if London prices were to break below $7,000, I doubt Shanghaiwould follow that quickly, because of the supply situation inChina."
London Metal Exchange three-month copper fell $25 or 0.33 percentto $7,485 at 0359 GMT.
"In the near term, there is potential for an uptick in prices ...on consumer restocking, but the trend going forward is lower.Demand from countries outside China is slowing at a time whensupplies are finally coming on," said National Australia Bank (nyse: NAB - news - people ) analyst Gerard Burg.
London Metal Exchange stocks are at their highest since February,although the latest release from the International Copper StudyGroup said the copper market was in deficit by 155,000 tonnes inthe first five months of the year.
The discount for third-month Shanghai copper futures versus thebenchmark London contract, including China's 17 percent VAT,narrowed to 1,366 yuan, from 1,578 yuan a tonne on Friday. Thediscount shrank to 716 yuan on Aug. 13, its narrowest since March.
Shanghai November zinc rose 155 yuan to 14,415 yuan a tonne, whileLondon lost $5 to $1,806. Zinc has risen more than 10 percent sincedipping to a 33-month low in mid-August.
Analysts were watching the track of Hurricane Gustav, which isexpected to slam into the Louisiana coast near New Orleans later inthe day as a major Category 3 hurricane.
With almost 40 percent, or 61,000 tonnes, of world LME zinc stocksin New Orleans, some traders feared a potential repeat of 2005'sHurricane Katraina, which cut off access to about half theavailable LME stock of zinc for months.
"I suspect the levees are more secure now than when Katrina hit.There might be a small hurricane premium in the price, but I don'texpect to see much of a reaction unless the city is badly hit,"said Burg.
For a graphic showing the trajectory of Hurricane Gustav, pleaseclick: https://customers.reuters.com/d/graphics/STRM_GUSTAVU2.gif
New Orleans also houses around 13,000 tonnes of copper.
A storm surge of up to 14 feet (4.3 metres) could threaten the samelevees that failed three year ago during Hurricane Katrina. Federalofficials say the levees protecting New Orleans are stronger nowbut still have gaps.
When Katrina struck in September 2005, LME zinc was trading around$1,300-$1,400 a tonne, and all but doubled by May 2006.
Shanghai aluminium fell 25 yuan to 17,705 yuan,
In an interview, Chinese aluminium producer Chinalco said itexpected primary aluminium prices to fluctuate around 18,000 yuan($2,628) per tonne in the second half. Metal Prices by 0359 GMT:Metal Last Change Pct Move End 2007 Pct chg 08 LME Cu 7485.00-25.00 -0.33 6670.00 12.22 SHFE Cu* 58540.00 -130.00 -0.22 56880.002.92 LME Alum 2717.00 3.00 +0.11 2403.00 13.07 SHFE Alum* 17705.00-25.00 -0.14 18180.00 -2.61 COMEX Cu** 341.95 -1.00 -0.29 304.1012.45 LME Zinc 1806.00 -5.00 -0.28 2370.00 -23.80 SHFE Zinc14415.00 155.00 +1.09 18950.00 -23.93 LME Nickel 20150.00 -100.00-0.49 26350.00 -23.53 LME Lead 1970.00 -10.00 -0.51 2550.00 -22.75LME Tin 19825.00 -175.00 -0.88 16400.00 20.88 LME/Shanghai arb^1366 ** 1st contract month for COMEX copper * 3rd contact month forSHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including17 pct VAT, minus SHFE third month ($1=6.848 yuan) (Editing by BenTan) Copyright 2008 Reuters, Click for Restriction