Copper flat, weighs concerns

Published Nov 15, 2012

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Copper steadied on Thursday, helped by signs that a slide in China's economic growth may have halted, but held back by concerns about a recession in the euro zone and the US fiscal cliff of spending cuts and tax hikes.

Three-month copper on the London Metal Exchange was virtually unchanged, rising $2 to $7,642 a tonne by 1505 GMT, after earlier touching an intraday low of $7,606.

Trading is likely to remain cautious in the weeks ahead, while the US Congress is locked in talks to resolve a fiscal impasse. If no agreement is reached, a $600 billion mix of tax increases and spending cuts is set to kick in on Jan. 1, threatening to derail the US economic recovery.

Data on Thursday sharpened those economic concerns, showing superstorm Sandy drove new claims for US jobless benefits to a 1-1/2 year high last week, a sign the deadly storm could hold back economic growth.

Also weighing on industrial metals was data showing the euro zone had fallen into a recession in July-September, the second since the global financial crisis in 2009. French resilience could not make up for a slump across Europe, and the three-year debt crisis slowed German growth to a crawl.

Copper has shed more than 9 percent since touching a peak of $8,422 in mid September following quantitative easing measures announced by the US Federal Reserve.

“For the rest of the year, price moves are not likely to be fundamental unless we see big moves in the news flow or in the dollar. Metals prices are expected to be range-bound until the end of the year,” said Robin Bhar, analyst at Societe Generale.

Prices are trading up just 0.7 percent in the year to date.

“In order to get real traction, we may need to wait for progress on the US government's finances and from further signs from China that its economy is turning higher,” ANZ analysts said in a note.

In China, the world's biggest consumer of copper, recent figures showed that a slowdown in growth rates probably hit bottom in October.

Investors have shied away from large purchases of the metal, however, due to bulging Chinese inventories and concerns about the fiscal health of the United States.

Several banks have flagged bullish price prospects from current levels for copper, indicating that prices could recover over the next six weeks due to signs China's economy had picked up in October.

“Leading indicators (in China) seem to suggest that the worst may be over and things should be improving. A lot of the negative sentiment has been priced into the market, and we are now looking for more positive news out of China,” Bhar said.

CHINA BUYS ALUMINIUM

China's ruling Communist Party unveiled an older, conservative new leadership line-up on Thursday that appears unlikely to take the drastic action needed to tackle pressing issues such as social unrest, environmental degradation and corruption.

“Despite events unfolding largely to script, there remains much uncertainty as to where this new generation of leaders will take China,” Mike Ingram, a market analyst at BGC, said in a note.

China's State Reserves Bureau kicked off its latest buying spree on Thursday, taking volumes of 100,000 tonnes each of aluminium and zinc from domestic smelters, falling short of the 160,000 tonnes of aluminium and 150,000 tonnes of zinc initially planned, sources said.

“Although the numbers are relatively small given the size of the market, it does suggest that the Chinese government has got its chequebook out and has effectively put a floor under the domestic aluminium market,” analyst Leon Westgate at Standard Bank in London said in a note.

Benchmark aluminium slipped 0.3 percent to $1,965, while zinc shed 0.4 percent to $1,942.

Tin added 0.1 percent to $20,500 a tonne, lead gained 0.4 percent to $2,190, while nickel lost 0.5 percent to $16,080. - Reuters

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