METALS-Copper falls on euro zone disappointment, China worry

Mon Aug 20, 2012 8:24am EDT

* China house prices rise in July, inflation curbs seen
    * Euro falls to session low, dollar recoups losses
    * Copper open interest at multi-year lows

    By Susan Thomas
    LONDON, Aug 20 (Reuters) - Copper fell on Monday on disappointment over a
lack of progress in solving the euro zone crisis and fears that top commodities
consumer China will step up a campaign to curb inflation in the metals-intensive
housing sector.
    Comments from German Chancellor Angela Merkel, supporting European Central
Bank efforts to address the euro zone crisis, had helped lift risk sentiment on
Friday, boosting prices of base metals.
    But any optimism that flowed from those remarks soon faded as euro zone
leaders failed to follow up with any concrete plans at the weekend. 
    In China, the world's top consumer of copper, home prices ticked up in July
from June, a second month of modest rises that raised the risk Beijing may seek
to ratchet up a two-year campaign to curb housing inflation. 
    Commodities markets were also disappointed that China, which accounts for 40
percent of the world's copper demand, held off on much hoped for monetary easing
last weekend.   
    "The focus of the market is back on Europe and China," said Standard Bank
analyst Leon Westgate.
    "The housing data on the surface suggests that property controls are going
to continue. In Europe, we've got a week of shuttle diplomacy and a lot of
talking but not much action."
    Three-month copper on the London Metal Exchange was $7,450 per tonne
in official rings, from $7,539 at the close on Friday, when it rose 1.2 percent.
    Copper open interest , or contracts that are 'live' - having not
yet come to expiry or closed out - is languishing at the lowest level in around
five years. Volumes were slim, with around at 5,403 lots of copper changing
hands.
    LME copper, which has dropped more than 27 percent from a record of $10,190
in February 2011, has been stuck in a narrow trading range between $7,300 and
$7,600 since July 20.
    To break out of the range, "you really need something to entice the guys on
the sidelines to come in. What you needs is a significant improvement or
deterioration", Westgate said. "At the moment it's status quo, drifting along."
 
   
    SUPPLY
    On the supply side, output from the world's largest copper mine, Chile's
Escondida, rose 18 percent in the first half of the year, compared with the same
period last year. This was partly due to better ore grades. 
    The euro fell as the dollar recouped losses against a basket of currencies,
making commodities priced in the U.S. unit more expensive for holders of other
currencies. 
    Three-month aluminium, untraded in rings, was bid at $1,835 a tonne
from $1,858 at the close on Friday. The metal has fallen about 10 percent so far
this year, after an 18 percent drop last year.
    Aluminium producers outside of China, the world's largest producer of the
metal, have been cutting production to counter a drop in aluminium prices, but
traders said this may do little to bolster the price if other countries such as
India seek to make up for the production shortfall this year. 
    India's aluminium exports could rise 5 percent in the current fiscal year to
325,000 tonnes despite a slowdown in global demand, a senior industry official
said. 
    Three-month zinc was $1,783.5 a tonne in rings from $1,796 at the
close on Friday, and nickel was $15,400 from $15,630. 
    Lead, untraded in rings, was bid at $1,881 from $1,895, and tin
, also untraded, was bid at $18,350 from $18,495.
 Metal Prices at 1219 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       336.35       -5.60     -1.64     344.75     -2.44
  LME Alum      1831.50      -26.50     -1.43    2020.00     -9.33
  LME Cu        7418.50     -120.50     -1.60    7600.00     -2.39
  LME Lead      1877.00      -18.00     -0.95    2034.00     -7.72
  LME Nickel   15411.00     -219.00     -1.40   18650.00    -17.37
  LME Tin      18360.00     -135.00     -0.73   19200.00     -4.38
  LME Zinc      1780.75      -16.25     -0.90    1845.00     -3.48
  SHFE Alu     15230.00      -65.00     -0.42   15845.00     -3.88
  SHFE Cu*     54870.00       20.00     +0.04   55360.00     -0.89
  SHFE Zin     14410.00      -90.00     -0.62   14795.00     -2.60
 ** 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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