METALS-Copper falls as euro zone growth fears resurge

Tue Nov 20, 2012 8:15am EST

* China housing inflation could be bearish for copper -ANZ
    * Aluminium inventories in LME warehouses rise to record high
    * Coming up: U.S. building permits for Oct at 1330 GMT

    By Andrew Heavens and Susan Thomas
    LONDON, Nov 20 (Reuters) - Copper fell on Tuesday after a downgrade of
France's credit rating reminded investors of the festering euro zone debt crisis
and took the steam out of a Monday rally built on positive announcements from
Europe and the United States.
    Prices for the industrial metal used widely in construction and power
followed shares lower after Moody's issued an expected downgrade of France's
credit rating, citing an uncertain fiscal outlook in the euro zone's second
biggest economy.
    "This is exactly the kind of thing we can expect to see over the coming
quarters - a few headlines of good news that are then reversed by ongoing
problems, particularly in Europe and the U.S.," said Barclays analyst Gayle
Berry.
    "I think that until those (growth concerns) are tackled at the core  then
prices are always going to be vulnerable to the ebb and flow of headlines," she
added.
    Three-month copper on the London Metal Exchange had slipped 0.68
percent to trade at $7,750 a tonne in official midday rings. Still, the metal
has risen around 2 percent so far this year.
    It closed at $7,803 on Monday after rising to its highest since Nov. 2,
helped by reports showing U.S. home sales rose last month and a gauge of home
builder sentiment climbed to a six-year high in November.  
    Construction is a significant market for copper with a little over 400lbs of
copper used in a typical U.S. home.
    In China, home prices rose 0.05 percent in October from September, according
to calculations based on official data this week, adding to evidence of a
recent, mild recovery in the country's property market and frustrating the
government's efforts to temper prices. 
    Signs that housing inflation is not easing in China, the world's biggest
copper consumer, could erode support for copper, ANZ Research said in a note.
    "With a focus on housing inflation, the latest data could prompt the
government to refrain from relaxing curbs on the property market - bearish for
copper," ANZ said.
    "Markets are closely watching for any policy direction from the new
leadership and will likely direct sentiment for base metals," ANZ added.
    Berry saw the base metals market remaining largely range-bound in the near
term.
    "For those metals like aluminium where the fundamentals are bearish...that
has already been priced into the market to an extent. For other metals where
things are a bit tighter, like lead and copper, those prices are holding up
relatively OK," she said.
   "I don't think you're going to see any brave trades being put on before the
end of the year." 
    Inventories of aluminium rose to an all-time high of 5.17 million tonnes,
data showed on Tuesday, in a market with a structural surplus. 
    While demand for aluminium has been hit by the global financial crisis,
producers have kept churning out metal, especially in China, the world's biggest
producer. 
    Three-month aluminium traded down 0.25 percent at $1,972 per tonne
in rings from $1,977 at the close on Monday. The price has shed 10 percent since
mid-September and has lost 42 percent since touching a peak of $3,380 a tonne in
July 2008.
    Investors are watching for U.S. housing starts data later on Tuesday and the
outcome of a euro zone finance ministers meeting in Brussels that is expected to
give a tentative go-ahead to release 44 billion euros ($56 billion) in emergency
loans to Greece. 
   Three-month tin was last bid up slightly at $20,825 a tonne in rings
from $20,780 at the close on Monday, while zinc traded down at $1,934 a
tonne from $1,937.
    Three-month lead traded down at $2,183 a tonne from $2,180 and
nickel traded down at $16,360 from $16,418.
 Metal Prices at 1310 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2009   Ytd Pct
                                                              move
  COMEX Cu       350.85       -1.90     -0.54     334.65      4.84
  LME Alum      1971.50       -5.50     -0.28    2230.00    -11.59
  LME Cu        7750.00      -53.00     -0.68    7375.00      5.08
  LME Lead      2182.50       -8.50     -0.39    2432.00    -10.26
  LME Nickel   16360.00      -65.00     -0.40   18525.00    -11.69
  LME Tin      20825.00       25.00     +0.12   16950.00     22.86
  LME Zinc      1934.00      -11.50     -0.59    2560.00    -24.45
  SHFE Alu     15360.00      -30.00     -0.19   17160.00    -10.49
  SHFE Cu*     56340.00      290.00     +0.52   59900.00     -5.94
  SHFE Zin     15000.00      -45.00     -0.30   21195.00    -29.23
 ** 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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