METALS-Copper rebounds from 3-mo lows, traders focus on supply

Tue Apr 17, 2012 2:35pm EDT

* Copper steadies above $8,000/T as risk assets climb
    * LME copper for tom-next at $40 backwardation
    * Rio Tinto mined copper output falls 13 pct
    * Coming up: US jobless claims, housing data Thursday

    By Chris Kelly and Melanie Burton	
    NEW YORK/LONDON, April 17 (Reuters) - Copper topped $8,000 a tonne on
Tuesday, rebounding from three-month lows a day earlier, as euro zone debt
worries eased and a surprise drop in Rio Tinto's copper output brought the red
metal's tight supply pipeline back into focus.	
    Copper pushed higher alongside a broader risk-on rally in global equities
and the euro after a smooth Spanish bond sale and upbeat German economic data
boosted investor confidence and boosted hopes the euro zone was recovering.
 	
    Further upside was unlikely as near-term demand prospects remained unclear
given the growing fears of slowing economic growth in key consumer China and a
fragile economic outlook from the International Monetary Fund (IMF).	
    "There's still a lot of uncertainty with respect to Chinese demand," said
Steve Platt, futures analyst with Archer Financial Services in Chicago.	
    "There's been a lot of pressure on the commodity indexes recently overall,
and copper is indicative of that weakness. This market seems like it's working
in a corrective phase to the downside ... as long as we hold below the $3.73 to
$3.75 ($8,223-$8,267/tonne) area, we could possibly see some further weakness."	
    London Metal Exchange (LME) three-month copper ended up $70 at
$8,050 a tonne, recovering from Monday's plunge to $7,885.25, its lowest since
early January.	
    In New York, the COMEX May contract settled up 1.90 cents at $3.6470
per lb, near the upper end of its $3.5845 to $3.65455 session range.	
    Despite its slide in early April, that saw prices of copper lose more than 9
percent of their value, the metal is still up about 5 percent this year.	
    COMEX copper volumes were heavier at more than 90,500 lots in late New York
trade, up over 40 percent from the 30-day average, according to preliminary
Thomson Reuters data.	
    Copper received a boost from a drop in the dollar against a basket of
currencies, a relationship that moved to its strongest since March 8.	

    "What we see in copper prices today is just a recovery move which could last
a few days," said Daniel Briesemann, analyst at Commerzbank.	
    "But given that the debt crisis in the euro zone seems to be back in focus
and given the higher risk aversion and growing uncertainty this is likely to
only be a temporary move and we still expect prices might go down again very
quickly."	
    Global growth is slowly improving as the U.S. recovery gains traction and
dangers from Europe recede, but risks remain elevated and the situation is very
fragile, the IMF said on Tuesday. 	
    In industry news, Rio Tinto  reported worse-than-expected
falls in iron ore, copper and coal production in the first quarter after it was
hit by bad weather, knocking the global miner's shares on Tuesday.
  	
    Mined copper output fell 13 percent to 119,500 tonnes against analysts'
forecasts of more than 140,000 tonnes. The global copper market is seen in a
180,000-tonne deficit this year, according to a poll of 19 analysts by Reuters
in April.	
    With the supply-side still underperforming, some industry players were
betting on the demand side.	
    Chinese copper demand will grow a little under 7 pct this year and more
positive signs of U.S. demand will help offset the impact of lingering European 	
economic woes, the head of Xstrata's copper unit Charlie 	
Sartain said on Tuesday. 	
    In a note to clients, Barclays Capital said investors sold a net total of
$2.2 billion in commodity investments in March, and persistent outflows from
index swaps indicated the outlook is uncertain for the rest of the year.	
    The March outflow compared with an inflow of $6.2 billion in February, and
the first-quarter inflow still amounted to $6.9 billion, the strongest quarter
in a year, the UK bank said. 	
      	
    SHORT TERM SQUEEZE	
    Glencore International is holding a dominant long position in the
London copper market, trade sources said on Monday, as tight supplies took the
premium paid by investors for cash metal over benchmark three-month futures to
its highest in 3-1/2 years. 	
    The squeeze on nearby copper supply for April continued on Tuesday,
highlighted by skyrocketing nearby premiums.	
    Copper for tomorrow/next day delivery - the cost of rolling the
position for a day from the third Wednesday prime prompt day - shot to its
highest in more than two years to $40 from $19 earlier, reflecting a lack of
available supply. 	
    The premium for cash copper shot to as high as $95 per tonne
against the benchmark three-month contract.	
   	
 Metal Prices at 1814 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       364.65        1.85     +0.51     343.60      6.13
  LME Alum      2076.00       11.00     +0.53    2020.00      2.77
  LME Cu        8050.00       70.00     +0.88    7600.00      5.92
  LME Lead      2073.00       -5.00     -0.24    2035.00      1.87
  LME Nickel   17825.00      325.00     +1.86   18710.00     -4.73
  LME Tin      21550.00      150.00     +0.70   19200.00     12.24
  LME Zinc      1991.00       -7.00     -0.35    1845.00      7.91
  SHFE Alu     16050.00        0.00     +0.00   15845.00      1.29
  SHFE Cu*     56530.00     -190.00     -0.33   55360.00      2.11
  SHFE Zin     15370.00       25.00     +0.16   14795.00      3.89
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07