METALS-Copper ends higher despite EU, U.S. debt worries

Mon Jul 18, 2011 2:38pm EDT

 * Euro zone, U.S. debt problems fail to break copper
 * China economy expands, more tightening seen
 * Coming up: US housing starts, building permits Tuesday.
 (Rewrites, adds New York dateline/byline, updates with New York
closing copper price, adds trader comments)
 By Chris Kelly and Pratima Desai
 NEW YORK/LONDON, July 18 (Reuters) - London copper ended up
for a second straight day on Monday, recouping earlier losses and
maintaining its positive momentum despite a host of discouraging
macro-economic developments.
 Even with debt default jitters in Europe and the United States
remaining a constant head wind for global growth prospects, copper
prices have barely budged, withstanding losses in other
economically sensitive markets like crude oil, as investors
remained confident of a falling supply base against an improved
second-half demand outlook for the metal this year.
 "Copper has been behaving well ever since we got the Chinese
import data last week, and these supply glitches are keeping
something of a floor under the market," said MF Global analyst
Edward Meir.
 London Metal Exchange (LME) benchmark copper CMCU3 ended up
$22 at $9,694 a tonne.
 In New York, prices failed to sustain late gains. The key
September COMEX contract HGU1 eased 1 cent to settle at $4.4030
per lb.
 Following a recent shake-out that saw prices lose about 15
percent of their value from the April highs, investors are now
re-enterng the market in search of value.
 "They are looking at things like copper, which still has a
decent supply story," said Randy North, a trader at RBC Capital
Markets.
 A once-in-a-half-century winter storm hit mining operations in
the northern part of top producer Chile this month, forcing more
than half a dozen mines to halt operations or slow mining after
dirt roads at their open pit operations became dangerously
slippery.
 While supply-side constraints in Chile and Indonesia played
out, demand signals in top consumer China offered further evidence
of a tightening market balance.
 Recent data showed Chinese copper imports climbed 9.9 percent
in June from a month earlier, suggesting the country's estimated
40 percent share of global copper consumption would not be
impacted from a round of monetary tightening measures.
[ID:nL3E7IA018]
 Asia's major economies are set for a modest slowdown in coming
months, while next year's growth prospects hinge on how quickly
inflation cools at home and demand recovers abroad, a Reuters poll
showed. [ID:nL3E7II11R]
 RBC's North also expected to see a pickup in Japanese demand,
with factory restarts nearly in full swing following the March
earthquake and tsunami.
 "All of that adds up to demand for copper," he said.
 In the United States, debt default concerns remained. Failure
to reach a deal to increase the debt ceiling could send shock
waves through global financial markets and plunge the country into
another recession, economists warned. [ID:nN1E76G06R]
 DEFICIT
 The euro zone's debt problems also weighed on sentiment as
Europe struggles to put together a second bailout for Greece and
prevent the region's debt crisis from spreading. [ID:nL6E7II0FP]
 "With global economic growth slowing, demand growth is set to
decelerate this year," Bank of America Merrill Lynch said in a
note. "High copper prices meant only subdued buying has emerged
from commercial players."
 BoA forecasts a deficit for the copper market this year and a
"small deficit" for the aluminum market.
 Three-month aluminum CMAL3 was untraded at the close, but
last bid was at $2,495 a tonne from $2,494 at Friday's close.
 Aluminum will be supported by changes in China, said Nic
Brown, an analyst at Natixis.
 "You can probably explain some of that by anticipation of a
move from 13 percent to 9 percent rebate, which is encouraging
aluminum exports, encouraging use of aluminium."
 China is weighing whether to cut export rebates for some
aluminum extrusion products to 9 percent from the current 13
percent and whether to abolish the 5 percent rebate for exporting
stainless steel wires and rods. [ID:nL3E7FC0W]
 Metal Prices at 1801 GMT
 Metal            Last      Change  Pct Move   End 2010   Ytd Pct
                                                         move
 COMEX Cu       440.50       -0.80     -0.18     444.70     -0.94
 LME Alum      2495.00        1.00     +0.04    2470.00      1.01
 LME Cu        9694.00       22.00     +0.23    9600.00      0.98
 LME Lead      2730.00       22.00     +0.81    2550.00      7.06
 LME Nickel   23800.00     -355.00     -1.47   24750.00     -3.84
 LME Tin      27350.00      150.00     +0.55   26900.00      1.67
 LME Zinc      2431.00       56.00     +2.36    2454.00     -0.94
 SHFE Alu     17675.00      250.00     +1.43   16840.00      4.96
 SHFE Cu*     71910.00      290.00     +0.40   71850.00      0.08
 SHFE Zin     18390.00      130.00     +0.71   19475.00     -5.57
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
 (Additional reporting by Susan Thomas; Editing by Jane Baird and
Jim Marshall)


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