METALS-Copper hits 2-month low on U.S. fiscal, euro zone concern

Fri Nov 9, 2012 12:16pm EST

* Signs of limited restocking by Chinese copper consumers
    * U.S. "fiscal cliff", euro zone debt crisis weigh
    * China data upbeat, congress eyed for stimulus hints

    By Maytaal Angel
    LONDON, Nov 9 (Reuters) - Copper hit its lowest in more than two months on
Friday as a stronger dollar, a looming U.S. fiscal crisis and renewed euro zone
worries sapped investor risk appetite and darkened demand prospects.
    Since the U.S. elections on Tuesday investors have become worried that
Washington could struggle to find a compromise to cut the budget deficit before
nearly $600 billion worth of spending cuts and tax increases kick in early 2013.
    The dollar index was up meanwhile, making headway versus the euro
amid uncertainty over aid for Greece and Spain and after European Central Bank
president, Mario Draghi, sounded a downbeat note on the economy. A strong dollar
makes dollar-priced metals costly for European and other non-U.S. investors.
    On the positive side, Chinese data showed industrial output and retail sales
for October slightly exceeded expectations, while annual October consumer
inflation eased to its slowest pace in nearly three years, giving policymakers
scope to further looser monetary policy if needed. 
  
    Three-month copper on the London Metal Exchange closed at $7,560 a
tonne, having earlier touched $7,506, its lowest since late August, and putting
it on track for a fifth consecutive week of falls. It closed at $7,630 on
Thursday.
    "A lot of people expected a weaker dollar post-QE III and that hasn't been
the case recently, so base metals have gone down. (Also) over recent weeks we've
seen people become less confident that the Chinese government is going to
announce lots of new (stimulus) measures," said BNP Paribas analyst Stephen
Briggs.
    According to global miner Rio Tinto, which sells tens of millions
of tonnes of iron ore, copper and coal to China annually, China's incoming
leadership change is unlikely to spur fresh economic stimulus measures anytime
soon. 
    China's once-a-decade leadership transition event, the 18th Party Congress,
opened on Thursday, with President Hu Jintao warning incoming leaders that
corruption threatened the ruling Communist Party and the state. 
    
    PHYSICAL COPPER IN CHINA
    In physical copper markets, Chinese traders are seeing modest improvement in
sales, with spot prices rising around 350 yuan to 55,950-56,150 yuan. 
    They said this has helped push physical premiums for copper imports up by
around $2 to around $50 a tonne over the past two days, although this does not
reflect higher bonded warehouse drawdowns.
    "Bonded warehouse drawdowns haven't risen by much, most Chinese buyers are
picking up duty-paid copper," said a Shanghai-based physical copper trader.
    Another said: "Prices will face downward pressure soon if they continue to
advance without clear support from either economic data or policies." 
    Also weighing, global refined copper supply in 2013 has been in focus
recently following data showing Chile exporting more copper concentrates, the
raw material for refined copper production. 
    Soldering metal tin closed at $20,300 a tonne from $20,500.
    Weighing on tin, data showed shipments of refined tin from Indonesia, the
world's top exporter, rose in October to 11,048.39 tonnes, up 12 percent from
September. 
    Zinc, used in galvanizing, closed at $1,890 a tonne from $1,929,
while battery material lead ended at $2,149 from $2,207.
    LME data showed 29,600 tonnes of zinc was booked to leave warehouses in
Antwerp, where a months-long queue has developed to withdraw metal. The data
also showed 22,300 tonnes of lead flowing into Johor, another backlogged
warehouse location.
    Aluminium closed at $1,921 from $1,925 a tonne and stainless-steel
ingredient nickel at $15,950 a tonne from $16,160.
    
 Metal Prices at 1703 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       344.20       -2.75     -0.79     344.75     -0.16
  LME Alum      1920.00       -5.00     -0.26    2020.00     -4.95
  LME Cu        7581.50      -28.50     -0.37    7600.00     -0.24
  LME Lead      2154.25      -52.75     -2.39    2034.00      5.91
  LME Nickel   15982.00     -178.00     -1.10   18650.00    -14.31
  LME Tin      20180.00     -120.00     -0.59   19200.00      5.10
  LME Zinc      1893.75      -35.25     -1.83    1845.00      2.64
  SHFE Alu     15240.00      -40.00     -0.26   15845.00     -3.82
  SHFE Cu*     55930.00      190.00     +0.34   55360.00      1.03
  SHFE Zin     14925.00       50.00     +0.34   14795.00      0.88
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07