METALS-Copper slides as industrial consumers baulk at high prices
By Eric Onstad
LONDON, Jan 20 (Reuters) - Copper prices fell sharply on Tuesday, with industrial buyers deterred by elevated prices when inventory levels are at multi-year highs.
Benchmark three-month copper CMCU3 on the London Metal Exchange dropped 1.6% to $12,763 a metric ton by 1700 GMT, having gained 1.3% in the previous session.
LME copper has surged by 30% over the past six months, touching a record peak of $13,407 last week, driven by speculative buying on worries that mine disruptions will create shortages.
"Copper cannot run away from the fact that it is an industrial metal and consumers are starting to baulk at these high prices at a time where exchange-monitored inventory levels are at their highest in eight years," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
Inventories in warehouses registered with the Shanghai Futures Exchange have more than doubled to 213,515 metric tons CU-STX-SGH since December 1. Stocks in U.S. Comex storage facilities have surged by 127% to 542,914 short tons HG-STX-COMEX over the past six months.
The price Chinese buyers pay for spot copper has tumbled to a discount to SHFE futures of 150 yuan a ton, compared with a premium of 200 yuan on January 15 SMM-CU-PND, highlighting the lack of buying interest for physical copper.
"Metals have been in such hot demand as hard assets given all the uncertainties that we have in the world. But ultimately, for now, it leaves gold as the superior metal for safety," Hansen added.
Gold surged past $4,700 an ounce for the first time on Tuesday to another record high. GOL/
LME lead fell 1.6% to $2,028.50 a ton after LME data showed that inventories jumped by 11% in one day. MPBSTX-TOTAL
LME nickel CMNI3 dropped 2.1% to $17,750 a ton despite miner PT Vale Indonesia saying that the mining production quota it received is likely to be insufficient to meet demand from the smelters in its pipeline for this year.
Among other metals, aluminium CMAL3 lost 1.5% to $3,110 a ton, zinc CMZN3 retreated by 1.5% to $3,173 and tin CMSN3 added 0.4% to $49,455.
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