METALS-Copper ends Q1 up 11 pct despite China fears

Fri Mar 30, 2012 2:54pm EDT

* Copper ends Q1 up 11 pct; tin up 19 pct
    * Lead fundamentals better than those of zinc -analysts
    * U.S. consumer spending jumps, income growth tepid
    * Coming up: China factory data for March on Sunday

    By Chris Kelly and Silvia Antonioli	
    NEW YORK/LONDON, March 30 (Reuters) - Copper rose on Friday, capping its
biggest quarterly gain since late 2010, as the dollar weakened and a bullish
trend in warehouse stockpiles boosted prices even as investors remained worried
about the Chinese demand outlook.	
    Copper rose 11 percent in the quarter, up more than any other quarter since
surging of almost 20 percent in the fourth quarter of 2010. The first-quarter
gain came on the heels of an 8-percent rise in the final three months of 2011,
as European debt crisis fears receded and healthier economic signals in the
United States helped drive investment demand at a time when fears about an
impending slowdown in China, which accounts for about 40 percent of global
copper demand, have escalated.	
    Analysts were skeptical about whether copper could post its third straight
quarterly gain, citing investor concerns about a slowing Chinese economy.	
    "I am not so sure we are going to see the same type of performance in Q2 ...
maybe a little bit more muted with a downside risk, particularly given that
China is at risk of a somewhat harder landing than I think most have priced in,"
said Bart Melek, head commodity strategist with TD Bank Financial Group.	
    London Metal Exchange (LME) benchmark copper closed up $95 at $8,445
a tonne.	
    In New York, the May COMEX contract rose 2.85 cents to settle at
$3.8250 per lb, after moving between $3.8055 and $3.8520.	
    Volumes were thin on the last trading day of March, with a little more than
49,400 lots traded in late New York business, down more than 20 percent from the
30-day norm, according to preliminary Thomson Reuters data.	
    Copper prices in London and New York peaked in the first quarter at $8,765
and nearly $4, but have lost some steam since. Prices have been locked in a
$8,100-$8,800 a tonne ($3.70-$4/lb) range for the better part of the quarter as
uncertainties about China's ability to steer its economy toward a soft landing
weighed.	
    "Although you do have a market very worried about Chinese demand, metals
have been performing surprisingly well," said Barclays Capital analyst Gayle
Berry. "I think we will see more range trading for copper unless something
convincing sparks a change."	
    Three-month tin was the best performer in the quarter, ending up 19
percent, while nickel stood at the bottom of the complex, with a loss of
5 percent.	
    Copper, and most other base metals, received a boost Friday from upbeat U.S.
data showing consumer spending increased by the most in seven months in
February.   	
    Furthermore, the dollar hit a one-month low against a basket of currencies,
extending falls on expectations of more U.S. monetary stimulus and helping the
euro hold its ground as the bloc agreed steps to prevent the debt crisis
spreading. 	
    A weaker U.S. unit makes dollar-priced commodities such as metals cheaper
for holders of other currencies.	
    	
    	
    	
    LEAD RECOVERS	
    Underpinning prices, inventories of copper in warehouses monitored by the
London Metal Exchange have been falling in the last six months,
signalling improving demand for the metal.	
    After a 2-1/2 month run up, copper inventories in warehouses monitored by
the Shanghai Futures Exchange have also started to decline in the
past two weeks. 	
    "Falling inventories and strong Chinese imports underscore the positive
cyclical picture for most markets," Credit Suisse said in a research note. 	
    "Combined with undervaluation and a neutral trend, we have a rather upbeat
outlook for the one-year time horizon."	
    The market will be looking to the weekend release of Chinese PMIs, which
previews the country's giant factory sector before official industrial
production data. It's expected to dip to 50.8 in March from a 5-month high of
51.0 in February, according to a Reuters poll.   	
    In other metals, prices of zinc surpassed lead this month for the
first time since September 2011, reversing their traditional relationship. The
two metals are currently trading at similar levels, but analysts see
fundamentals pushing lead prices ahead once again.	
    "We see lead prices increasing. It has been suffering from short-selling,
but I think there is quite a lot of upside potential, particularly because of
supply-side support," Barcap's Berry said.	
    Doe Run declared force majeure on lead output from the sole U.S. primary
producer in Herculaneum, Missouri, following a fire last week that will stop
production for up to six weeks. 	
    Three-month lead closed up $45 at $2,040 a tonne, and zinc 
eased $4 to close at $2,001.	
	
 Metal Prices at 1936 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       382.30        2.65     +0.70     343.60     11.26
  LME Alum      2126.00       -9.00     -0.42    2020.00      5.25
  LME Cu        8444.00       94.00     +1.13    7600.00     11.11
  LME Lead      2042.00       47.00     +2.36    2035.00      0.34
  LME Nickel   17825.00      675.00     +3.94   18710.00     -4.73
  LME Tin      22750.00       50.00     +0.22   19200.00     18.49
  LME Zinc      2000.00       -5.00     -0.25    1845.00      8.40
  SHFE Alu     16165.00       -5.00     -0.03   15845.00      2.02
  SHFE Cu*     60010.00      270.00     +0.45   55360.00      8.40
  SHFE Zin     15445.00      105.00     +0.68   14795.00      4.39
 ** 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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