May 24, 2017 / 11:07 AM / 3 years ago

METALS-Copper heads lower after Moody's downgrades China

* LME/ShFE arb: (Updates with closing prices)

By Peter Hobson

LONDON, May 24 (Reuters) - The copper price fell on Wednesday after Moody’s downgraded China’s credit ratings for the first time in 30 years, raising concerns about demand in the world’s largest consumer of industrial metals, but a drop in copper stockpiles limited losses.

Nickel, much of which goes into making stainless steel, also fell sharply as Chinese iron ore and steel futures tumbled and a rise in stockpiles pointed to ample supply.

Copper demand is, however, less dependent on Chinese economic stimulus measures than steel, said Julius Baer analyst Carsten Menke. “This is a sentiment-driven correction rather than a fundamentals-driven correction,” he said.

LME COPPER: Copper on the London Metal Exchange closed down 0.6 percent at $5,682 a tonne, having fallen to $5,635.50 earlier in the session.

COPPER STOCKS: Traders said prices were supported by a 18,825-tonne fall in on-warrant copper stocks available to the market at LME-registered warehouses. On-warrant stocks have declined by 28 percent to 176,225 tonnes from a high of 243,300 tonnes on May 4. MCUSTX-TOTAL

COPPER TECHNICALS: Technical support was around $5,635-$5,660. “It needs to close below the $5,620 area to look lower again,” said a copper trader.

CHINA DOWNGRADE: Moody’s said it expected the financial strength of China’s economy to erode in the coming years as growth slows and debt continues to rise.

CHINA STEEL: Chinese steel futures fell and iron ore tumbled 7 percent following the downgrade and on concerns about ample supply.

U.S. PROPERTY: New U.S. single-family home sales tumbled from near a 9-1/2-year high in April, but the housing recovery likely remains intact amid a tightening labour market.

LME NICKEL: Lower Chinese steel and iron ore prices and a surge in Chinese nickel ore imports from the Philippines drove LME nickel to finish down 2.6 percent at $9,100 a tonne.

NICKEL STOCKS: Traders said a 4,128-tonne rise in on-warrant nickel at LME-registered warehouses to 269,808 tonnes helped drive prices down by signalling good supply. MNISTX-TOTAL

ZINC & LEAD SUPPLY: The global zinc and lead markets fell into a deficit in March after surpluses in February, data from the International Lead and Zinc Study Group (ILZSG) showed on Wednesday.

PRICES: Lead closed down 1 percent at $2,076 a tonne Zinc was 0.9 percent lower at $2,635, tin fell 0.6 percent to $20,375 and aluminium gained 0.1 percent to close at $1,945.

Additional reporting by Melanie Burton; Editing by Greg Mahlich and Edmund Blair

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