Copper rebounds on dollar, gains crimped by growth fears

LONDON (Reuters) - Copper bounced on Thursday from two-week lows as the dollar fell, but the gains were likely to be capped as investors fret about the growth outlook for big metals consumer China and the grinding debt crisis in the euro zone.

Three-month copper on the London Metal Exchange closed 0.9 percent higher at $8,239.50 per metric tonne after hitting a two-week low of $8,105 earlier in the day.

The recovery was helped by a weaker dollar .DXY after the euro rose. A softer dollar makes commodities priced in the U.S. currency cheaper for holders of other currencies.

Industrial metals fell on Wednesday after Chinese car sales disappointed, adding to downward pressures from a slowing economy and rising fuel costs that have weighed on the world's biggest auto market.

Aluminium producer Alcoa (AA.N) followed that news with an announcement that it was lowering its demand forecast.

Copper prices have rallied nearly 10 percent after monetary easing announcements by the U.S. Federal Reserve and a bond buying promise by the European Central Bank on September 6, but have been moving sideways since touching a 4-1/2 month high about three weeks ago.

Ross Strachan, an economist at Capital Economics, said prices could be pressured after China publishes trade data this weekend and its gross domestic product figures next week.

"I think there is a likelihood that GDP could be weaker than some in the market are anticipating, and therefore that will perhaps drag on metals prices," Strachan said.

China is scheduled to publish third-quarter GDP data next week, with investors anticipating a seventh straight quarter of slowing growth, and economists were reluctant to make fresh forecasts so close to the release date as they run the risk of having to immediately revise their assumptions.

Deutsche Bank said feedback from a recent field trip by the bank's equity analysts to China showed general sentiment in the industrial metals sector remained bearish.

China is the world's top consumer of metals, accounting for 40 percent of refined copper demand last year.

TEPID

Tepid demand growth and improving mine supply will swing the copper market into a 458,000-tonne surplus next year, snapping a three-year run of deficits, the International Copper Study Group (ICSG) said on Wednesday.

Along similar lines, China's demand signals remained so slack for the fourth quarter that some manufacturers were considering further exports of surplus stock, a China copper analyst at a producer said.

"Seasonally, in July and August we expect weaker demand but by October it should improve. But some copper semis producers are saying that Q4 orders are in line with Q3, and maybe even have declined a little bit. They're talking about exporting their extra copper to foreign countries," she said.

"Codelco import cathode negotiations are coming up and so are TC/RC (treatment and refining charge) talks, so we can find a signal on growth expectations for next year. There may be some change in sentiment after LME Week in London next week," she added.

Top copper producer Chile's Codelco CODEL.UL is expected to agree on term premiums of around $105 for shipments of refined copper cathode to China during the industry's key event, LME Week, when smelters will also hammer out 2013 processing fees with miners.

A resumption in tin shipments from Indonesia, the world's top exporter, could weigh on prices that rallied more than 10 percent in September in part as markets responded to a halt in exports.

Refined tin exports gained 75 percent last month to 9,874.47 metric tonnes from 5,645.87 metric tonnes in August, a trade official said.

LME three-month tin ended 0.3 percent firmer at $21,900 per tonne.

UBS was moderately optimistic about aluminium in its commodity price review.

"We expect a 5 percent lift in the price going into 2013, reflecting further production capacity cuts," said analyst Myles Allsop in a note.

Three-month aluminium did not trade at the close, but was bid at $2,015 per tonne, up $6 from Wednesday's close.

In other metals, LME zinc slipped 0.4 percent to close at $1,967 per tonne, lead shed 0.6 percent to $2,183 and nickel edged 0.3 percent higher to $17,725 a tonne.

(Additional reporting by Melanie Burton in Singapore; editing by William Hardy)