Chinese concerns weigh on copper price

COPPER fell for a fifth straight session on Monday, its longest losing streak since June, on concerns about slower purchases from China.

Still, the first withdrawal in London Metal Exchange （LME） copper stocks in a month and limited deliveries from a major Chilean mine highlight troublesome supply-side issues that have managed to keep prices of the red metal up near last week's record peaks of $US9,754 per tonne in London and $US4.4980 per lb in New York.

Copper was one of a few commodity markets depressed by European debt concerns, which initially pulled the euro down to a four-month low against the dollar and blunted appetite for "riskier" assets.

LME copper for three-months delivery shed $US104 to finish at $US9,321 per tonne, near the bottom of its $US9,300 to $US9,459 session range.

COMEX copper for March delivery ended with a loss of 1.80 cents at $US4.2645 per lb - a shade below the contract's 20-day simple moving average.

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Technicians see a reversal in the metal's overall uptrend at the $US4.10 level.

Copper's demand-driven rally in 2010 - up more than 33 per cent - seemed to be running out of gas in the first two weeks of the New Year as investors continued to cash in on the red metal's historic run.

Chinese trade data showing a 2 per cent decline in copper imports in December kept that profit-taking trend in place.

"The stronger dollar is part of it. But a lack of Chinese buying in the past few weeks has also curbed the upside for copper," said Merrill Lynch-Bank of America analyst Michael Widmer.

"We need to see more activity there … that is what （investors） are waiting for," he said.

China is the world's top consumer of base metals and is expected to account for nearly 40 per cent of global copper consumption estimated at around 19 million tonnes.

Despite the month-over-month decline in imports, inflows into the metals giant managed to reach a new record high, a feat that may be repeated in 2011, market watchers said.

Supply-side issues limited further losses.

Chile's Collahuasi mine plans a third shipment - 10,000 tonnes - of concentrate next week via the Antofagasta port after a shiploader accident shut its sea terminal on December 18, an official at the port told Reuters on Monday.

LME copper stocks fell by 1,225 tonnes on Monday to 378,300 tonnes. Stocks have risen steadily since early December - up nearly 30,000 tonnes.

INDEX REBALANCING

Traders said index rebalancing this week spurred purchases on the LME ring close of aluminum and zinc, which lent some support to prices.

Zinc was set to experience the largest amount of buying of around 150,000 tonnes, equivalent to some 15 per cent of monthly consumption, Macquarie said in a research note.

Nickel was to see the largest amount of selling of some 12,000 tonnes, or about 10 per cent of monthly consumption, the note said, adding slightly over 100,000 tonnes of aluminum should be bought, while copper may be sold this week.

However, a large build of aluminum into LME warehouses pressured prices, as stocks climbed nearly 100,000 tonnes, their biggest daily jump since May 2009.

"Whether the material is related to a financing deal or any of the proposed metal ETFs is uncertain," said Standard Bank.

Aluminum ended down $30 at $US2,488 a tonne, zinc shed $US66 to $US2,379 a tonne, and nickel fell $US325 to finish at $US23,875 a tonne.