* Copper set for second weekly rise, monthly drop
* S&P; cuts Spain’s ratings by two notches
* China copper stockpiles near record 1 mln T high-Stan Char
By Harpreet Bhal
LONDON, April 27 (Reuters) – Copper rose to a three-week
high on Friday supported by a weaker dollar and tight supplies
of the metal outside China, but worries about the escalating
debt crisis in Europe following a Spanish credit downgrade kept
a lid on prices.
Benchmark copper on the London Metal Exchange (LME)
was trading at $8,389 a tonne by 1300 GMT, up from the $8,322 a
tonne on Thursday.
Stocks of the red metals in Europe, the U.S. and Asia, have
been falling as it is shipped to top consumer China, where still
stagnant demand means copper is piling up towards record highs.
Copper in LME-registered warehouses fell to their lowest
levels since November 2008 at 251,825 tonnes, with cancelled
warrants – the metal earmarked for delivery – at 39.5 percent of
total stock. In Shanghai, copper stockpiles fell to
the lowest since February to 204,762 tonnes.
“What we are seeing in stocks is supportive for prices.
Cancelled warrants remain very strong, on the LME the market is
still in steep backwardation and we are also seeing inventory
draws,” said Andrey Kryuchenkov, analyst at VTB Capital.
“This has helped copper push through the $8,200 level and
the long-term range that we have had since January. “
The metal used in power and construction rose to its session
high, and the highest since early April at $8,395 a tonne, as
the dollar fell against a basket of currencies shortly after
weaker than expected growth data from the United States.
The U.S. economic growth cooled in the first quarter as
businesses cut back on investment and restocked shelves at a
moderate pace, but stronger demand for automobiles softened the
blow, the Commerce Department said on Friday.
A softer U.S. unit makes dollar-priced commodities such as
metals cheaper for holders of other currencies.
Copper is on track to rise for the second straight week, but
is still heading for its second monthly loss as a shaky global
economy, including slower growth in top copper user China,
weighed on prices that have dropped around 5 percent from this
year’s high of $8,765 struck in February.
Copper remains plentiful in China, Standard Chartered said
in a note, even as the seasonally strong second quarter gets
under way. It estimates bonded inventory at 600,000 tonnes, and
total China stock near record highs around 1 million tonnes.
China accounted for 40 percent of refined copper demand in 2011.
“(Local industry) expect domestic demand to continue its
seasonal improvement going into May, mainly because
air-conditioner production should rise and wire and cable demand
is likely to improve,” it said.
“However, no one sees a surge in demand from here. A
seasonal improvement in demand will help reduce stockpiles
somewhat, but we do not expect significant declines as
downstream consumers remain cautious about buying on soft order
books.”
EURO ZONE WORRIES
Worries about the debt crisis in Europe after Standard &
Poor’s cut Spain’s credit rating by two-notches to BBB plus kept
gains in check.
The downgrade has once again ignited fears over the euro
zone with investors worrying whether countries such as Portugal,
Italy, Greece and Spain, also known as the ‘PIGS’ economy, would
be able to service their massive pile of debt.
“Spain’s rating downgrade by S&P; late yesterday evening has
destroyed the positive market sentiment which had prevailed
yesterday,” Commerzbank analysts said in a note.
Spain’s sickly economy faces a “crisis of huge proportions,”
a minister said on Friday, as unemployment hit its highest level
in two decades and Standard and Poor’s weighed in with the
downgrade of the government’s debt.
In other metals, aluminium was at $2,107.25 from
Thursday’s close of $2,086; zinc, used to galvanize
steel, was at $2,039.25 from $2,035 and battery material lead
was at $2,139.50 from $2,124.
Tin was at $22,500, up from $22,310 while nickel
climbed to $18,390 from $18,200.
