METALS-Copper nears 2012 peak on China economy hopes

Thu Mar 1, 2012 2:57pm EST

* Copper climbs on upbeat China, U.S. economic data
    * Copper prices within 2 pct of 2012 highs
    * LME copper stocks at 2-1/2-year low
    * Cancelled warrants at 32 pct
    * Coming up: Weekly Shanghai metals inventory data Friday

    By Chris Kelly and Susan Thomas	
    NEW YORK/LONDON, March 1 (Reuters) - Copper rose more
than 1 percent on Thursday, recouping some of the previous day's
losses, as data indicated top metals consumer China will avoid a
sharp economic slowdown to boost risk appetite and overshadow
concerns over Europe's debt crisis.	
    Copper pushed higher in thinner-than-normal volume as it
tracked gains in U.S. equities and other commodity markets, like
crude oil and gold, in reaction to upbeat economic data from
China and the United States that bolstered demand prospects for
industrial metals. Copper's advance left it within 2 percent of
its yearly peaks of nearly $8,800 per tonne in London and $4 per
lb in New York.	
    "For the better part of the last three months, this has all
been a liquidity run ... a risk-on trade in basically all global
risk assets, including equities and commodities," said Sean
McGillivray, vice president and head of asset allocation for
Great Pacific Wealth Management in Oregon.	
    "Now commodities are hanging in there at some pretty high
levels and the only way you get buyers in at those levels is
that there is a fundamental back story."	
    London Metal Exchange (LME) three-month copper rose
$131 or 1.54 percent to end at $8,630 per tonne.	
    In New York, the active May COMEX contract firmed
5.20 cents to settle at $3.9315 per lb, closer to the upper end
of its $3.8485 to $3.9370 session range.	
    Volumes were thin on the first trading day of the new month.
A little more than 51,400 lots traded in late New York business,
nearly a third below the 30-day average, according to
preliminary Thomson Reuters data.	
    Copper's advance was rooted in overnight data from China
showing the country's official purchasing managers' index rose
to 51.0 in February from 50.5 in January, as export orders
bounced back.  	
    "There's a greater probability now of a soft landing as
opposed to the hard landing markets were worried about late last
year," said Bart Melek, head commodity strategist with TD Bank
Financial Group.	
    But a divergence between China's official sentiment index of
purchasing managers and HSBC's private-sector factory data
reminded investors of the fragile state of the global economy.
 	
    "The Chinese (data) was reasonably positive and when you
look at more than one day's data the majority of data is
reasonably encouraging for north America," said Neil Buxton,
managing director at ThomsonReuters-GFMS Metals Consulting.	
    "Obviously you've got the debt issue (in Europe) but the
other side of the coin is we're in a low interest rate
environment which in theory should boost consumer expenditure
and the construction sector in particular," he added. 	
    U.S. data out on Thursday clouded the economic outlook, but
was not enough to dislodge the view that the world's largest
economy was slowly recovering. 	
    Growth in U.S. manufacturing unexpectedly cooled in February
and consumer spending was flat in January for a third straight
month, overriding the  positive impact from jobless claims
numbers, which held near four-year lows suggesting the labor
market is gaining momentum. 	
    "The U.S. data, while not fantastic, is significantly better
than other parts of the world," Great Pacific Wealth's
McGillivray said.	
    "It shows that the economy is picking up some sort of
measurable steam."	
    	
        	
    FOCUS	
    In Europe, data showed factory activity was stagnant at best
in February, as leaders wrestled with the balance between budget
austerity and reviving lost growth at the first summit for two
years in which the euro zone debt crisis did not eclipse all
else. 	
    "At the moment, the focus is very much on policy decisions
but we would note that there are interesting industrial metals
specific factors working in the background," Credit Suisse said
in a research note.	
    It pointed to cancelled warrants, or inventories already
earmarked for delivery, at the LME, which continue to rise.	
    "This suggests that physical demand is higher than many
market participants believe. We expect the price path in the
coming days to be volatile," Credit Suisse said. "Nevertheless,
price risks are to the upside."	
    Copper stocks in warehouses monitored by the LME fell to a
2-1/2 year low of 292,250 tonnes, down 4,175 tonnes, data on
Thursday showed. The ratio of cancelled warrants to total stocks
stood at 32.2 percent, with most of the tonnage in U.S.
locations. 	
    Global miner Rio Tinto  said it expected the
copper market to stay tight despite growth in supply, with the
company anticipating rising costs and supply disruptions to
continue, following strikes last year.   	
    Rio, which is looking to sell most of its Australia and New
Zealand aluminium business, remained bearish on the aluminium
market, with smelters facing a margin squeeze as costs rise and
aluminium prices remain weak. 	
    Aluminium ended up $23 to end at $2,353 a tonne.	
    	
 Metal Prices at 1918 GMT
                                                                                 
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       392.65        4.95     +1.28     343.60     14.28
  LME Alum      2353.00       23.00     +0.99    2020.00     16.49
  LME Cu        8628.00      129.00     +1.52    7600.00     13.53
  LME Lead      2162.50        2.50     +0.12    2035.00      6.27
  LME Nickel   19495.00      240.00     +1.25   18710.00      4.20
  LME Tin      23770.00      145.00     +0.61   19200.00     23.80
  LME Zinc      2105.00       -7.00     -0.33    1845.00     14.09
  SHFE Alu     16195.00      -55.00     -0.34   15845.00      2.21
  SHFE Cu*     60290.00     -780.00     -1.28   55360.00      8.91
  SHFE Zin     15890.00     -250.00     -1.55   14795.00      7.40
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
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