METALS-Macro-economic fears keep copper pinned below $8,000

Mon Apr 16, 2012 2:13pm EDT

* Copper hits 3-month low as global growth concerns weigh
    * Spanish bond yields above 6 pct affect wider markets
    * Sharp pullback in spec net long copper positions-CFTC
    * Coming up: U.S. March industrial output data Tuesday

    By Chris Kelly and Veronica Brown	
    NEW YORK/LONDON, April 16 (Reuters) - Copper touched a three-month low under
$8,000 a tonne for the second straight day o n M onday, pressured by diminishing
second-quarter demand prospects linked to slowing economic growth in top
consumer China and Europe's festering debt crisis.	
    Copper fell in sympathy with other riskier assets like crude oil and the
euro after an acknowledgement by Spain that it probably has tipped into its
second recession since 2009 escalated concerns about global demand for raw
materials, already in doubt from a slowdown in China. 
 	
    "The market's a bit heavy here ... lower demand from China and Europe a big
question mark, I don't see anyone having a big desire to move into copper at
this point," said Sterling Smith, an analyst for Country Hedging Inc in St.
Paul, Minnesota.	
    "The situation in Spain is much closer to a depression given the
unemployment rate in excess of 20 percent. This could set off another
Greece-like situation."	
    He expected the bearish mood to keep prices on a bearish course in the
near-term, with further liquidation pressures potentially taking prices down
toward the $3.20 ($7,050 a tonne) area before support comes in.	
    London Metal Exchange (LME) three-month copper fell $410 to end at
$7,980 a tonne, recovering a bit from an earlier plunge to a three-month low of
$7,885.25.	
    In New York, the COMEX May contract eked out a 10-cent gain to settle
at $3.6280 per lb, after dealing from its own three-month low at $3.5690 to
$3.6345.	
    COMEX copper volumes stood above 76,000 lots in late New York trade, more
than 20 percent above the 30-day norm, but below last week's elevated pace that
saw volumes hit a record 127,276 contracts on Tuesday.	
    Copper managed to bounce off of its worst levels Monday after data showed
U.S. retail sales had risen more than expected in March. But a separate report
from the New York Federal Reserve showed the pace of manufacturing growth in New
York state slowed sharply in April to its lowest level in five months.
  	
    "Mixed U.S. data is not going to give the bulls a big enough hook to hang
their horns on, which will probably lead to lower prices," Country Hedging's
Smith said.	
    Reflecting this view was the latest data from the Commodity Futures Trading
Commission (CFTC) which showed a sharp retreat in the net long COMEX copper
positions.	
    Money managers, including hedge funds and other large speculators, cut
15,687 contracts during the week of April 10, to bring the net long position to
2,955 contracts -- the lowest level since the week of Sept. 18, when they were
net long on 300 contracts, the data showed.    	

    Further cuts in the net long copper position were likely after data on
Friday showed the Chinese economy grew at its slowest clip in nearly three
years.   	
    "We have the China slowdown fears and now the flare-out in Spanish yields,
and that has put pressure on the euro, so that's a dampener on sentiment,"
Societe Generale analyst Robin Bhar said.	
    On the supply side, Chile's copper production is expected to grow by more
than 6 percent this year, the country's mining minister said on Monday,
recovering from a 3-percent fall in 2011. 	
    Mining group Anglo American sees its copper output jumping this year as its
disputed Los Bronces mine in Chile gears up, while a chronically under supplied
and volatile market will briefly tilt into surplus next year, chief executive
John MacKenzie told Reuters. 	
       	
    EURO ZONE FEARS 	
    In February, copper was up nearly 15 percent for the year when it hit a high
of $8,765 a tonne as investors bet on firm Chinese demand and tight global
supplies. That year-to-date gain thinned to less than 4 percent on Monday.      	
    Spain's banks increased their reliance on cheap loans from the European
Central Bank in March, borrowing almost double what they did in February.
 	
    Uncertainty over the euro zone and wider global economy and the issue of
Chinese demand are expected to keep copper prices soft this year, although
analysts are slightly more optimistic than they were in January, a Reuters poll
showed on Friday. 	
    The average forecast of 37 analysts in the survey, carried out in recent
weeks, called for cash prices for the metal used in power and construction to
average $8,445 a tonne in 2012, rising to $8,818 in 2013. 	
	
 Metal Prices at 1745 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       363.70        1.00     +0.28     343.60      5.85
  LME Alum      2064.00      -16.00     -0.77    2020.00      2.18
  LME Cu        7984.00       -6.00     -0.08    7600.00      5.05
  LME Lead      2077.00       12.00     +0.58    2035.00      2.06
  LME Nickel   17500.00     -805.00     -4.40   18710.00     -6.47
  LME Tin      21400.00     -805.00     -3.63   19200.00     11.46
  LME Zinc      1995.00       11.00     +0.55    1845.00      8.13
  SHFE Alu     16050.00     -110.00     -0.68   15845.00      1.29
  SHFE Cu*     56720.00    -1310.00     -2.26   55360.00      2.46
  SHFE Zin     15345.00     -220.00     -1.41   14795.00      3.72
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07