Copper yesterday traded with the negative node and settled -0.55% down at 423.95 following data showing more gloom about the global economy. Pressure seen from manufacturing activity in the euro zone contracted at the fastest pace since June 2009 in May. Its preliminary manufacturing purchasing managers’ index fell by 0.9 points to a seasonally adjusted 45.0 in May from a final reading of 45.9 in April. Reduced levels of output, new orders and employment meant that the headline German manufacturing PMI fell to its lowest since June 2009. Copper traders also remained risk adverse after summit of European Union leaders made little signs of progress in tackling the debt crisis in the region. Leaders reiterated that they want Greece to remain in the euro area, but urged the country to honor its commitments to austerity measures and the reforms demanded under its bailout program. Prices have tracked investor sentiment toward the euro zone’s debt crisis in recent months.

Internationally major metal commodities dropped to a five-month low, extending this year’s decline, on mounting concern that Greece will leave the euro, roiling financial markets and eroding the outlook for raw-material demand. But on Domestic count rupee weakness had supported the prices, till yesterday we have seen rupee made a multi-year low of 56.41and recovered from a new record low after the central bank governor did not rule out selling dollars directly to oil importers. Making dollars available for oil companies would remove a sizeable source of demand for the greenback from the market, and help support the rupee, which has hit record lows over the last seven consecutive sessions. The rupee also gained as market saw sporadic intervention from the Reserve Bank of India, while other traders cited dollar selling by custodian banks as well as exporters converting their foreign currency holdings on the last day of the two-week deadline mandated recently by the central bank.

No wide impact was seen from the government's decision to allow a hike in petrol prices, especially as doubts emerged about whether policy makers would follow up with hikes in other fuels such as diesel that would have a bigger impact on fiscal consolidation. After intervening aggressively earlier this month, traders say the RBI has appeared to hold back in recent days, reluctant to fight the intense global risk aversion that is pushing up the dollar. However, the central bank was seen selling dollars on Wednesday, and some saw signs of action on Thursday.

Equity markets fell from Asia to the Americas and the euro dropped to its weakest level against the dollar since July 2010 on speculation that European Union leaders meeting today will provide no new measures to stem the sovereign-debt crisis. Greece is preparing for elections on June 17, after winners in a vote this month failed to create a government.

Raw materials slid to a five-month low this week and more than $4.3 trillion was erased from the value of global equities this month on concern that Greece will exit the euro as the region’s debt crisis deepens. Manufacturing in the 17-nation euro area slumped to the weakest in almost three years this month and may shrink for a seventh month in China, which accounts for about 40 percent of global copper consumption.

Shortage Narrowing

The metal’s third consecutive annual shortage is narrowing, with demand expected to outpace supply by 158,000 tons this year, compared with 213,000 tons in 2011. While stockpiles monitored by the LME dropped 40% this year, some of the metal may be going into bonded warehouses in China that are exempt from a value-added tax and import duties. Inventories in those warehouses are about 600,000 tons. The total including refined and semi-finished metal probably climbed to a record of about 1 million tons. China’s refined copper imports slid 21% in April from a month earlier, customs data show. Goldman Sachs Group Inc. still expects Chinese demand to drive prices to $9,000 in three

months. The bank’s copper consumption indicator, tracking consumer appliance and auto demand in the nation, was at the second-highest level ever last month, the bank’s analysts said in a May 23 report. The gauge will climb about 3 percent this year and about 8 percent next year, they forecast.

Global Expansion

The global economy will expand 3.5 percent this year and 4.1 percent next year, the IMF estimates. Chinese Premier Wen Jiabao said over the weekend that the nation will focus more on spurring growth. Germany, Europe’s largest economy, will consider all ideas on bolstering the euro area, Finance Minister Wolfgang Schaeuble said May 21. Potential production losses may help sustain a supply shortage. BHP Billiton Ltd. and Rio Tinto Group (RIO), the world’s biggest and third-biggest mining companies by sales, said this month they’ll ration capital spending because of costs. Codelco, the largest copper producer, produced 10 percent less metal in the first quarter as ore-grades decreased.

Shanghai inventories

Shanghai inventories of Copper declined sharply by 9.3% in the week ending 25 May 2012. The total inventories in Shanghai warehouses were 157489 tonnes, compared to 173814 tonnes on 18 May 2012. It will be interesting to note that even after a sharp decline in prices the metal hasn't seen any sharp run up. Earlier it was said that the declines in Shanghai warehouses will be fulfilling the needs of LME warehouses. However, looking at the LME inventories total warehouse stocks have increased by only 1% to 223500 tonnes this week from 221175 tonnes at the beginning of the week on 18 May 2012. Shanghai Copper was trading up by 430 yuan per tonne to 55610 yuan per tonne on Friday. The rise was due to short covering and hopes that Chinese economy will be supported by government moves. PMI data from China was down for the seventh consecutive week and this had ignited profit booking in metals.