copper musings by Silvia Antonolio [fwiw]LONDON July 21 (Reuters) - Copper fell on Thursday as data showed thefactory sector in top metals consumer China shrank in ,July but losses werecapped by a weaker dollar and hopes of a resolution of the Euro debt crisis.
Benchmark copper on the London Metal Exchange fell 0.67 percent to$9,690 per tonne by 0829 GMT from $9,755 at the close on Wednesday.
The metal used in power and construction was less than 5 percent lower thana record high of $10,190 it hit on Feb 15.
"We are seeing a bit of weakness today despite a weaker dollar and despitethe possibility of a preliminary solution of the Euro crisis," Eugen Weinberg,an analyst at Commerzbank, said.
"This is stemming mainly from China. The preliminary reading of PMI fromHSBC is dampening a bit of optimism."
China's factory sector contracted for the first time in a year in July andat its fastest pace since March 2009, a purchasing managers' survey showed, asmonetary policy tightening and slack global demand weighed on theeconomy.
"On the other hand it is still possible that the Chinese government willcontinue to tighten its monetary policy given the rising inflation...this maycool demand for copper," Weinberg said.
Supporting copper, the euro edged up against the dollar after Germany andFrance agreed on a joint position for bailing out Greece, stoking hopes for realprogress at the coming European summit after an array of false starts.
A softer U.S. currency makes dollar-priced commodities less expensive forholders of other currencies.
SHORT-TERM WEAKNESS
However, analysts said this is a short-term weakness and copper will attractmore inflows of investors again, as the economy recovers, due to sound long-termmarket fundametals.
"The latest supply dynamics in the copper market hint at some easing ofimmediate tightening pressures," Credit Suisse said in a note. "This coincideswith a pause in inventory drawdowns at both the LME and SHFE exchanges. However,we view this moderation as temporary due to the robust underlying demand."
Results of a Reuters poll of 41 analysts on prices and market balance forbase metals will be published at 1210 GMT. In the previous survey, analystsforecast a 444,000 tonnes surplus for copper in 2011.
"We are optimistic for copper and nickel," Weinberg said.
Nickel was trading at $23,878 a tonne from $24,045 per tonne at theclose on Wednesday.
A fall in nickel inventories pointed to a certain tightness in the metal.Nickel stocks in LME-approved warehouse MNISTX-TOTAL fell 354 tonnes to101,574 tonnes, the lowest since late March 2009, latest data showed.
This, coupled with nickel mining projects delays, is quite supportive forthe metal used for stainless steel production in the short medium-term but manylarge projects will come on stream in 2012-2013 and this will dampen nickelprices, Weinberg explained.
The global nickel market was in supply deficit by 9,300 tonnes in the firstfive months of 2011, the latest monthly bulletin from Lisbon-based InternationalNickel Study Group (INSG) showed on Tuesday.
Tin was at $28,026 from $28,300 while zinc , used togalvanize steel was at $2,439 from $2,454 Wednesday's close.
Battery material lead was at $2,691.50 from $2,700 and aluminium was at $2,516 from $2,536.
Metal Prices at 0834 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct move COMEX Cu 440.50 -2.60 -0.59 444.70 -0.94 LME Alum 2536.00 0.00 +0.00 2470.00 2.67 LME Cu 9755.00 0.00 +0.00 9600.00 1.61 LME Lead 2695.00 -5.00 -0.19 2550.00 5.69 LME Nickel 24040.00 -5.00 -0.02 24750.00 -2.87 LME Tin 28300.00 0.00 +0.00 26900.00 5.20 LME Zinc 2453.00 -1.00 -0.04 2454.00 -0.04 SHFE Alu 17505.00 -130.00 -0.74 16840.00 3.95 SHFE Cu* 72150.00 -530.00 -0.73 71850.00 0.42 SHFE Zin 18560.00 -135.00 -0.72 19475.00 -4.70 ** Benchmark month for COMEX copper