Copper at 20-month lows on China Woes

By Susan Thomas; Thomson Reuters Fri Jun 21, 2013 3:02pm BST

* Copper hits lowest since Oct. 2011 at $6,692 a weekly loss of nearly 4%

* Fears of banking crunch in China ease

* LME, Shanghai copper inventories rise to 10 year record; imports down 23.15% year on year

    Copper came off a 20-month low on Friday but remained on track for a third weekly fall on fears of a slowdown in China's economic growth.   Three-month copper on the London Metal Exchange was up 0.87 % at $6,829 a tonne at 1348 GMT, off an intra-day low of $6,692, its weakest since October 2011. The metal is on course for a weekly loss of nearly 4%.

    Base metals, along with other financial markets, have been hammered after the U.S. Federal Reserve said on Wednesday that by mid-2014 it would curb its programme of monthly liquidity injections which have supported commodity prices since the financial crisis.

BNP Paribas analyst Stephen Briggs cited two factors supporting the price. "One is that there appeared to be some intervention by the central bank in China to stabilise the situation with the liquidity crunch," he said. "Also, losses have been pretty substantial in the last few days, and you always get some kind of bounce."

    Fears of an immediate banking crunch in China eased overnight on market talk the central bank had guided the biggest state lenders to provide more short-term funds to smaller banks. China's short-term funding rates remain elevated, however.   Indicating poor demand for copper, data showed inventories in warehouses monitored by the Shanghai Futures Exchange rose 3.2% from last Friday, while daily LME data showed stocks rose by 21,725 tonnes to 664,850, their highest level in a decade.

    Data on Thursday showed China's factory activity had weakened to a nine-month low in June, heightening the risk of a sharper second-quarter slowdown and helping push copper to a 20-month low early in the session.

    "With many complexes now clearly oversold in base metals, we should start to stabilise heading into next week as new (albeit lower) trading ranges start to get carved out," said INTL FC Stone analyst Ed Meir.

    Lending copper some support, however, Chinese refined copper imports rose to 232,155 tonnes in May from April's 183,023, although they were down 23.15% year on year, customs data showed.