METALS-Copper falls to one-week low on disappointing China data
* China's February flash PMI drops to 7-month low
* LME copper stocks fall further to 14 month low
(Updates prices, adds comment, detail; previous SYDNEY)
By Harpreet Bhal
LONDON, Feb 20 (Reuters) - Copper slipped to a one-week low
on Thursday, dragged lower by data showing a contraction in
China's manufacturing sector, which raised doubts about the
outlook for demand from the metal's top consumer.
Three-month copper on the London Metal Exchange
slipped to $7,131 a tonne at 1054 GMT, down 0.7 percent from a
close of $7,180 on Wednesday. It earlier fell to a low of $7,113
The metal used in power and construction has fallen more
than 3 percent in the year to date.
Data from a preliminary private survey showed activity in
China's factories shrank in February as employment fell at the
fastest pace in five years.
China is the world's largest copper consumer, accounting for
roughly 40 percent of global refined demand.
Helping limit the price fall, however, were LME data showed
a further fall in copper stocks held in warehouses registered by
the exchange, indicating tight short-term availability of the
"For copper the macro environment is going to stay a
headwind as long as we get weaker-than-expected Chinese data,"
Gayle Berry, an analyst at Barclays, said.
"But prices are finding support from more constructive
fundamentals. Copper stocks are falling, physical premiums are
holding up pretty well and the market is in deficit."
China's Lunar New Year festival, from Jan. 31 through early
February, is likely to have affected factory output as
manufacturers shut shop for its biggest annual holiday.
"Markets are pretty sensitive to bad news coming out of
China, and they probably should be, given its role as a major
purchaser of copper," economist James Glenn of National
Australia Bank in Melbourne said.
"Our view is a continued ebbing of growth."
Signs of weakness in U.S. economic growth also weighed on
sentiment. The latest data showed U.S. housing starts posted the
biggest drop in almost three years in January, the latest
suggestion that a brutally cold winter has been putting a big
dent in the economy.
Three Federal Reserve officials said on Wednesday, however,
they believed the U.S. economy was gaining traction, allowing
the central bank to stick to its plan to wind down its massive
bond-buying stimulus this year.
At 289,600 tonnes, copper stocks were at their lowest in 14
months, having fallen steadily since September.
Reflecting tightness in the market, LME cash prices climbed
a premium of $43 over the benchmark three-month contract, up
from around $11 at the start of the year.
In industry news, Japan is preparing to take Indonesia to
the World Trade Organisation over the ban on exports of mineral
ores, the Nikkei business daily said.
In a related development, Beijing is organising a delegation
of Chinese companies that have plans to build metals plants in
Indonesia, in a first sign the government may be concerned over
ore supplies because of the Southeast Asian country's mineral
ore export ban.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(Additional reporting by Melanie Burton in Sydney; editing by