Copper flat

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CopperMine REUTERS

Copper prices traded flat on Tuesday, as hopes that economic data from China will show a recovery in the metal's top consumer is gathering pace offset concerns about the outlook for growth in Europe and the United States.

Benchmark copper on the London Metal Exchange was at $8,072 a tonne at 12:26 SA time, from Monday's close of $8,071 a tonne.

China's annual economic growth may have quickened to 7.8 percent in the fourth quarter a Reuters poll showed, snapping seven straight quarters of weaker expansion, while its export growth probably rebounded from three-month lows in December.

China is the world's biggest copper consumer, accounting for 40 percent of refined demand. The trade data, which includes initial estimates for metals imports and exports, is due on Thursday.

“The market is underpinned by expectations that a cyclical rebounding out of China will be positive for industrial metals, and there is more positive sentiment now in the market,” said Robin Bhar, analyst at Societe Generale.

The metal used in power and construction, which gained more than 4 percent in 2012, hit its highest level in more than two-months last week following a deal by US lawmakers to avoid a “fiscal cliff” of spending cuts and tax increases.

But prices have since retreated on expectations that the US Federal Reserve may rein in easing measures sooner than expected, and caution ahead of US debt ceiling negotiations that are set to take place in coming months.

“There are still a few banana skins in the market. The US fiscal cliff resolution was greeted euphorically but it is only temporary respite. Talks will have to start again about raising the debt limit, and that could prompt some caution,” Bhar said.

Highlighting the cautious outlook for growth, German imports unexpectedly slumped in November and exports also slid sharply, narrowing the trade surplus, in a further sign the euro zone crisis led to a fourth quarter contraction in the region's largest economy.

INDEX REBALANCING

Some volatility is also expected ahead of the annual S&P GSCI and DJUBS commodity indices rebalancing which began this week, with selling pressure seen in aluminium and zinc, brokers said.

“We would expect the nearby spreads to be offered for the next few days as the index rolls start up ... and for aluminium and zinc to underperform as the Dow Jones/UBS Commodity Index rebalance sees selling interest hitting on the close for the next few days,” said RBC Capital in a note.

According to Morgan Stanley research, a net decline in the Dow Jones-UBS aluminium weighting to 4.9 percent from 5.9 percent should result in sales of 14,621 lots of aluminium, just under 3 percent of total futures contracts open interest.

A decline in zinc weighting to 2.5 percent from 3.4 percent in the index should result in sales of 14,144 lots, more than 8 percent of total open interest.

Benchmark zinc slipped to $2,008.25 from Monday's close of $2,021 while aluminium fell to $2,050 from $2,065.

Lead was at $2,294 from $2,305, tin at $23,900 from $24,050 and nickel rose to $17,249 from $17,210. - Reuters


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