Tuesday, 14 July 2015 16:45
LONDON: Copper and other metals retreated on Tuesday on uncertainty about Greece’s debt deal, weaker oil prices and inventory rises that highlighted concerns about excess supply.
The London Metal Exchange saw strong gains on Monday following a bailout deal between Greece and creditors, but the Greek premier has less than 48 hours to pass a series of pro-market reforms in parliament and smother dissent from hardliners.
“There was absolute relief yesterday, but now people are standing back and realising there’s still several hurdles,” said Stephen Briggs, metals strategist at BNP Paribas in London.
Three-month copper on the London Metal Exchange had dropped 0.9 percent to $ 5,542.50 a tonne by 1004 GMT, following small losses the previous session. Copper prices plumbed a six-year trough of $ 5,240 a tonne last week. Further pressuring the market was LME data showed inventory increases in four of the six main base metals, including copper.
“The fundamentals for copper are not great. Demand is growing only slowly, we’re in the midst of this mini-boom in mining and the market’s in surplus,” Briggs said. “If China is not prepared to swallow this stuff, whether it’s the SRB (State Reserves Bureau) or financing deals, it’s going to have to appear somewhere. And I expect more of this (stock rises) to happen this quarter when demand is on the soft side.”
A tumble in oil prices weighed on the market after Iran and six global powers reached a landmark nuclear deal. Lower energy prices cut costs for miners, making them less sensitive to declining prices and staving off output cuts.
Markets, which were also still digesting the aftermath of last week’s stock market crash in China, were moderately soothed after the country’s bank lending rose sharply in June.
The crash will have drained liquidity from a credit-strapped metals industry which may crimp further buying, keeping pressure firmly on copper prices, said analyst Judy Zhu of Standard Chartered in Shanghai.
“It’s quite likely this kind of pressure is going to last for a while until people see improvement in their cash flow it’s possible that prices could see new (2015) lows from here.” Lead dropped 1 percent to $ 1,825 a tonne after LME stocks surged by 29 percent or 49,625 tonnes.
Prices jumped 3 percent on Monday after LME data showed one party had taken control of 40-50 percent of LME inventories, but Tuesday’s delivery eased worries about potential shortages.
LME nickel sank 1.7 percent to $ 11,555 a tonne, paring part of the previous session’s 4.2-percent advance, which was fuelled by investors rushing to cover short positions.
