November 17, 2015 / 11:31 AM / 5 years ago

METALS-Copper drops to lowest in more than six years, China in focus

* Copper’s downward momentum becoming self-fulfilling -analyst

* China bonded stocks up to 430,000 T from 360,000 T end-Sept -CRU (Adds closing prices)

By Pratima Desai

LONDON, Nov 17 (Reuters) - Copper prices touched their lowest levels in more than six years on Tuesday as fears about demand growth in top consumer China and a higher dollar fuelled negative sentiment.

Benchmark copper on the London Metal Exchange hit $4,590 a tonne in early trading, its lowest since May 2009.

The metal used in power and construction industries recovered in afternoon trade as the dollar ceded some gains and funds took profits on short positions — bets on lower prices. It ended 0.1 percent down at $4,684.

Copper demand growth in China, which accounts for nearly half of global consumption estimated at about 23 million tonnes this year, has slowed significantly as industrial and construction activity has dwindled.

“It’s hugely sentiment-driven at the moment,” Capital Economics commodities economist Caroline Bain said.

“It’s not a rosy outlook, but neither is it cataclysmic. I do feel it is an overreaction, but I also would be very reluctant to say when it will stop because there is momentum and it can become quite self-fulfilling.”

The latest sign of weak demand came from Chile’s Codelco , the world’s biggest copper producer, which sources say has cut its 2016 premium to China for the refined metal by more than a quarter to a three-year low.

“Codelco is trying to secure market share. We all know China is now producing a lot more refined copper itself. It doesn’t mean demand for final use is going to be lower, it just means the sourcing is different,” Capital Economics’ Bain said.

Still, ample supplies in China can be seen in bonded copper stocks, which are up to 430,000 tonnes from 360,000 tonnes in late September, according to figures from consultancy CRU.

“The evidence so far in November suggests that despite copper prices falling to new lows for the year, (Chinese) fabricator appetite for spot cathode purchases has continued to soften versus third-quarter levels,” Standard Chartered said.

Growing expectations that the U.S. Federal Reserve will raise interest rates in December are behind the stronger U.S. currency, which makes dollar-denominated commodities more expensive for companies outside the United States.

Three-month aluminium tumbled to $1,457 a tonne, its lowest since June 2009, with the metal having come under pressure for most of this year from worries about oversupply.

It ended closed wih a gain of 0.5 percent at $1,474 a tonne on growing expectations of large aluminium output cuts in top producer China.

Zinc lost 2.5 percent to $1,548, lead rose 0.1 percent to $1,595, tin was unchanged at $14,700 and nickel fell 2.1 percent to $9,110.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

Editing by David Goodman and Susan Thomas

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