Mounting inventories rock industrial metals

Chinese metals futures are poised to fall Monday as stockpiles continued to rise last week while the domestic markets were closed for a public holiday.

The most traded copper contract on the Shanghai Futures Exchange (SHFE), for July delivery, fell 1.51 percent over the first three days of last week to close at 53,990 yuan ($8,699.65) per ton. The SHFE and other Chinese mainland futures markets were closed Thursday and Friday for the Tomb-sweeping Day holiday.

Because of the holiday, the SHFE did not digest the changes in the metals futures on the London Metal Exchange (LME) in the latter half of last week.

Three-month LME copper Wednesday fell to an eight-month low of $7,390 per ton, though managed to recover some of the loss by the end of the week. The contract finished the week at $7,422 per ton, down about 1.5 percent for the week.

The contract suffered from an emerging oversupply problem and lack of demand.

"Market sentiment has completely gone. It is with equities now, not with metals, and fundamentals are not improving," VTB Capital analyst Andrey Kryuchenkov told Reuters Wednesday. "We are seeing more stocks going in than out at the moment."

Copper inventories in LME-tracked warehouse rose 1,200 tons last Wednesday to 572,325 tons, the highest level since October 2003, Reuters reported. LME inventories of zinc and aluminum also hit or approached near highs.

The most traded SHFE zinc contract, for July delivery, shed 1.66 percent over the short week to close at 14,555 yuan per ton. SHFE aluminum for July delivery lost 0.44 percent to close at 14,580 yuan per ton.

The stage was already set for further losses due to the discouraging US employment figures released Friday. The monthly non-farm payrolls report showed the US gained 88,000 jobs in March, about half of what had been expected.