Copper prices to stay low on demand fall

The unexpected decline in demand and rising supplies are likely to keep copper prices subdued.

A study group has called for a surplus in the refined copper market of about 580,000 tonnes in 2010, due to an expected decline in demand and rising supplies.

The United States is the world's second-largest copper consumer after China, which is expected to account for more than 30 per cent of global demand, estimated at around 19 million tonnes this year. But concerns that China will extend monetary tightening measures, especially in the booming property market, helped scupper copper's attempt to maintain a mid-month rally above $8,000 (Dh29,383) a tonne.

"Events in China and Europe over the last fortnight have reduced the chances that China will raise interest rates in May, as we had expected. A first hike may now wait until the fourth quarter," said Capital Economics in a note.

On the plus-side, stocks of copper in LME warehouses, seen by some as a proxy for demand, fell by 3,250 tonnes to 499,300 tonnes, their lowest since the end of last year.

LME copper stocks are down 55,775 since mid-February, but most of that drawdown came before April, suggesting the pace is decelerating.

The economically-sensitive metal has been hit in recent weeks from currency-related selling and fears of Western world demand deterioration as the euro zone's fiscal problems mount.

A positive copper settlement last week was not enough to push prices into the plus column for the month, as uncertainties surrounding a bailout for debt-laden Greece and monetary tightening measures in China fanned concerns about near-term demand prospects.

While prices ended higher, for the month, the metal used in power and construction lost about five per cent of its value, the worst monthly performance since January.

Copper for July delivery on the New York Mercantile Exchange's Comex division ended up 0.30 cent at $3.3535 per lb, after trading in a range from $3.3935 to $3.3355, holding above Thursday's 1-1/2-month low at $3.3340 per lb. On the London Metal Exchange, benchmark copper ended at $7,430 a tonne, up from $7,355 a tonne at Thursday's close, when it hit its lowest since late March at $7,341.50.

Copper prices rose as the dollar's drop boosted demand for commodities as alternative investments. "Metals are up modestly as the euro rises against the dollar on apparent relief over Greece," said David Thurtell, a Citigroup analyst in London.

Earlier, escalating sovereign-debt concern in Europe and tighter monetary policy in China pushed copper down 0.4 per cent in New York. The metal capped its biggest weekly drop since early February and its first monthly fall since January, dropping 6.1 per cent.

"Copper has gotten whacked around because people think the Greece situation will slow things, and on concerns about China," said Donald Selkin, Chief Market Strategist, National Securities in New York.