March 7, 2017 / 11:27 AM / 3 years ago

METALS-Copper falls as inventories surge, zinc also weak

* On-warrant LME copper stocks surge 74 pct over two days

* Zinc hits 7-week low, copper at lowest in a month

* Philippine president wants compromise of mining, environment

* Nickel sees biggest one-day fall in nearly two months (Updates with closing prices)

By Eric Onstad

LONDON, March 7 (Reuters) - Copper fell to its lowest in a month on Tuesday on a surge in warehouse stocks and zinc hit a seven-week low as investors liquidated positions in both metals on concerns that markets had decent supplies despite mine strikes and shutdowns.

On-warrant copper inventories in London Metal Exchange warehouses - those not earmarked for shipment and available to investors - have soared by 74 percent this week after inflows into mostly Asian depots, LME data showed. MCUSTX-TOTAL

On Friday a weekly 23,974-tonne build in Shanghai Futures Exchange stocks took total inventories to just shy of 320,000 tonnes, the most since last April. CU-STX-SGH

“These stock increases are spooking the market but maybe they’re reading too much into it, thinking it reflects slowing demand in China or the Asian region,” said Robin Bhar, head of metals research at Societe Generale in London.

“There’s always a fairly slow start to most years, the first quarter is pretty weak and then we have a strong Q2 and I don’t see anything to change that pattern. I would think there are buyers out there willing to buy the dips.”

Three-month LME copper closed down 1.5 percent at $5,773 a tonne, the weakest since Feb. 6, after 1 percent losses in the previous session.

Disruptions at the world’s two biggest mines, in Chile and Indonesia respectively, pushed copper back above $6,000 a tonne last month, while workers at Cerro Verde mine, one of the largest copper producers in Peru, also plan to start a five-day strike on Friday.

A consensus is growing that the drop in mine supply matched with a pick-up in global demand will elevate prices.

“We do have a $6,500 target for copper in six to 12 months,” said UBS Wealth Management analyst Dominic Schnider in Hong Kong.

Zinc slid 1.7 percent to end at $2,693, the lowest since Jan. 17, as investors awaited more evidence that closures and suspensions of major mines last year were tightening the refined market.

“In zinc the story has not changed much since last year. The concentrate market is likely at peak levels of tightness; however, so far this year, refined tightness has yet to fully arrive,” JPMorgan analyst Natasha Kaneva said in a note.

Nickel tumbled 4.1 percent to close at $10,645, the biggest one-day fall in nearly two months, after further news from top ore exporter the Philippines.

President Rodrigo Duterte said he hopes there would be a “happy compromise” between the mining industry and protecting the environment while his environment minister has asked for a halt of a second review of 28 mines that she ordered closed or suspended.

“The reviews already have to work their way through the system with some legal challenges, so this just adds to the noise and confusion,” Bhar said.

Aluminium finished unchanged at $1,876, lead traded down 0.4 percent in closing rings to $2,234 and tin also shed 0.4 percent to $19,375.


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 (Additional reporting by Melanie Burton in Melbourne; Editing by Ruth Pitchford and David Evans)

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