Copper stumbles on China growth worries; US data

Copper prices lurched lower on Wednesday after weak data from the United States and as the market worried about demand from top consumer China on talk of higher capital adequacy ratios for the country's banks.

Benchmark copper on the London Metal Exchange was trading at $7,569 a tonne at 1336 GMT from $7,660 on Tuesday.

However, the metal used in power and construction hit a session low of $7,548 a tonne after the release of US industrial production data showed output rose at a slower pace in August.

"The path of least resistance at the moment is to take some money off the table," said RBS analyst Nick Moore.

"Over August we saw copper drawdowns from the LME for only the second time in 25 years, which sets a supportive backdrop. There is very strong support at $7,500 a tonne."

Stocks of copper in LME warehouses fell more than 14,000 tonnes in August. They stand at 389,500 tonnes, a drop of about 30 per cent since the middle of February.

However, weighing on sentiment was China's banking regulator, said to be considering raising capital adequacy ratios at banks deemed "systemically important".

"It looks as if the government in China is focusing on trying to constrain excesses in the property market, that it is considering increasing capital ratios," said Dan Brebner, analyst at Deutsche Bank.

Also weighing on industrial metals were comments from an adviser who said China needs to increase bank deposit rates to help fight inflation. But those were played down by China's economic planning agency.

Focus is also on the US Federal Reserve, which could soon announce more quantitative easing.

A metals trader said the prospect of further easing would reassure the market that the Fed was ready to act. "But it would also confirm that there is something to worry about."

WATCH CHINA COPPER IMPORTS

News that the New York Federal Reserve Bank's "Empire State" manufacturing activity index fell to 4.14 in September from 7.10 in August also damaged sentiment.

The United States is the world's second-largest consumer of copper after China, which many still expect to account for the dragon's share of copper demand growth. Analysts expect to see this in import data over coming months.

Refined Chinese copper import data for August, due later this month, is expected to show a rise based on preliminary numbers last week, while U.S imports also appear to be picking up after a slowdown earlier this year.

Aluminium traded at $2,143 a tonne from $2,159 at the close on Tuesday, zinc at $2,135 from $2,175, lead at $2,208 from $2,242, tin at $22,700 from $22,650 and nickel at $23,00 a tonne from $23,350.

Tin hit $22,990 a tonne, its highest since late July.

"The Democratic Republic of Congo (DRC) has banned all mining activity and mineral trading in the volatile districts of North and South Kivu and Maniema as part of its battle to tackle illegal operations," Barclays Capital said in a note.

"While all the details are not as yet known, the ban could impact between 80-90 percent of mined tin (casserite) in the country."

Traders said the market was keeping a close eye on large warrant and cash contract positions in aluminium alloy, primary aluminium, copper, nickel and tin.