Copper up from 2-month lows

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CopperMine REUTERS

Copper rebounded on Monday from a previous two-month low after Greece's lawmakers approved a pivotal budget reform which boosted the euro, but gains were capped by concerns about the US fiscal cliff and waning demand from China.

The dollar index was flat, with the euro holding steady versus the greenback after the Greek budget approval. However, gains were limited as a meeting of euro zone finance ministers on Monday was not expected to agree the release of fresh bailout funds.

Also weighing on copper, weekend data showed a sharp fall off in copper imports from China - which consumes about 40 percent of the world's copper - while Japanese growth data pointed to a mild recession in the world's third-largest economy

In the US meanwhile, the economy is facing a fiscal cliff that could see nearly $600 billion worth of spending cuts and tax increases begin in early 2013 if Republicans and Democrats fail to agree a last minute budget deal.

Three-month copper on the London Metal Exchange climbed 0.59 percent to $7,602.25 by 12:33 SA time, reversing losses from the previous session when it closed down more than half a percent.

“The euro strengthened because of Greece, but more cuts just means the economy goes deeper into recession, perpetuating how many times Greece comes back with the begging bowl,” said Citi analyst David Wilson.

A weaker dollar versus the euro makes metals priced in the US currency cheaper for European and other non-US investors.

Looking ahead Wilson said: “We see slowing Chinese copper imports over the next few months, because of the crackdown on collateralised financing (of copper). At some point this is going to be factored into copper price.”

Copper hit its lowest since August 31 on Friday at $7,506 a tonne. Prices have fallen for the past five weeks, erasing gains made after Europe and the US retained easy monetary conditions in September.

Helping the metal rebound though, is a series of recent upbeat data from China suggesting seven straight quarters of slowing growth have ended. On the other hand, the uncertainty surrounding China's leadership change is tempering optimism.

COPPER IMPORTS FALL

Also, China's copper import growth slowed sharply to hit a 17-month low in October, a delayed effect of the negative arbitrage conditions over the summer caused by higher international prices compared to the domestic market.

Futures-based arbitrage for copper, based on three month LME and ShFe prices, has turned positive for imports, although including premiums of $40-$60 paid for stock in bonded warehouses, they are not yet in profitable territory, a Shanghai-based trader said.

Battery material lead fell 0.16 percent to $2,145.5 a tonne, giving back some of the strong gains seen over the past few weeks even as the physical market remains tight.

LME data showed the premium for cash lead against the three-month contract surged to $28.50 a tonne by Friday's close, its highest in more than a year and up from an $8 discount on Oct. 22.

The market for lead has tightened due in part to thinning scrap supply brought about by a mild winter in the US and Europe last year that caused fewer batteries to fail.

Supply tightness has also been exacerbated by big banks and trade houses pulling metal into LME-monitored warehouses with long backlogs.

Elsewhere, soldering metal tin rose 0.37 percent to $20,375 a tonne, with data showing the premium for cash tin over the three month price at $30 a tonne as of Friday, indicating tight nearby supply.

Zinc, used in galvanising rose 0.42 percent to $1,898 a tonne, with data showing 60,700 tonnes were booked to leave LME warehouses in Antwerp, extending the length of the multi-month queue there and making more zinc supply unavailable.

Aluminium rose 0.61 percent to $1,932.75 a tonne, while stainless-steel ingredient nickel, the worst performing LME base metal this year, rose 0.19 percent to $15,980.

Helping aluminium, China's State Reserves Bureau (SRB) issued a tender to buy 160,000 tonnes of the light metal from local smelters, two sources who received the tender notice said on Monday. - Reuters


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