METALS – Copper Closes First Quarter Lower Due to Weak China Demand, Reports Reuters

Copper Prices Decline Amidst Chinese Demand Concerns

Copper prices closed slightly higher on Thursday but recorded a 2.4 percent loss for the first quarter of 2011—marking its first quarterly decline since the second quarter of 2010. This drop in price is attributed to worries regarding weaker demand from China and an increase in warehouse stocks, impacting market sentiment.

Traders noted that the day’s increase was influenced by position adjustments and a weakening U.S. dollar. In contrast, other base metals performed better during the quarter, with tin gaining 18.3 percent, aluminum increasing by 7.2 percent, and lead and nickel each rising about 5 percent.

Copper prices have fallen more than 7 percent from their record highs reached last month, where they stood at $10,190 per tonne in London and $4.6575 per pound in New York. Prolonged softness in Chinese purchasing and a build-up of stockpiles in London are expected to maintain downward pressure on prices in the near term.

Duncan Hobbs, an analyst at Macquarie, commented, "The Chinese market has hit a soft spot lately, reflected in the sharp fall of physical premiums and increased metal deliveries to LME and Shanghai warehouses." He added, "All these factors indicate that the market is currently soft."

On the London Metal Exchange, three-month copper increased by $49 to close at $9,430 per tonne. However, for the quarter, this reflects a 2.4 percent decrease compared to the last three months of 2010, marking its first quarterly loss since June.

In terms of COMEX trading, May copper settled up 3.35 cents at $4.3075 per pound, closing the quarter down 3 percent.

Frank Lesh, a broker and futures analyst from Future Path Trading, expressed, "We’re still left wondering where the Chinese buying is that everyone expected… The reality is they have sufficient supplies and can afford to wait for prices to fall."

In China, high bonded stocks, estimated at around 600,000 tonnes, have discouraged fabricators from increasing their copper holdings. Compounding this concern is the steady rise in copper stock levels, which are now at their highest since July 2010, having increased by 125 tonnes since December.

The base metals sector has faced challenges this year due to geopolitical unrest in the Middle East and North Africa, which has raised oil prices and heightened inflation fears, along with the fallout from the earthquake and tsunami in Japan.

In other metal markets, aluminum rose by $16 to close at $2,645 per tonne, supported by rising energy costs that pushed prices to a 2.5-year high of $2,656 earlier this week. Analysts from Credit Suisse noted that while Chinese output increased as government-imposed power restrictions were eased, supply growth is not expected to match demand growth, potentially resulting in reduced inventories and providing support for prices.

Zinc also experienced a rise, increasing by $24 to $2,362 per tonne. Dowa Mining Holdings Co announced plans to restart operations at its 200,000 tonnes-per-year Akita zinc smelter in northeastern Japan by early April. This plant, being Japan’s largest zinc smelter, accounts for nearly 30 percent of the country’s total production capacity, which has been significantly impacted since the March 11 earthquake.

Current Metal Prices Overview

Here’s an overview of the latest metal prices:

• COMEX Copper: 430.15 cents/lb, down 3.27%
• LME Aluminum: $2,648.00, up 7.21%
• LME Copper: $9,427.00, down 1.80%
• LME Lead: $2,694.00, up 5.65%
• LME Nickel: $26,090.00, up 5.41%
• LME Tin: $31,795.00, up 18.20%
• LME Zinc: $2,360.00, down 3.83%

This report reflects continued market dynamics influenced by supply and demand factors, with particular focus on developments in China and adjustments in global economic conditions.