METALS-Copper slips as euro zone growth concerns resurface

Tue Nov 20, 2012 12:28pm EST

* China housing inflation could be bearish for copper -ANZ
    * Aluminium inventories in LME warehouses rise to record high
    * U.S. housing starts rise to highest in four years


    By Andrew Heavens and Susan Thomas
    LONDON, Nov 20 (Reuters) - Copper dipped on Tuesday on worries over demand
prospects after a downgrade of France's credit rating reminded investors of the
festering euro zone debt crisis and overshadowed optimism that euro zone
ministers would release funds for Greece.
    Moody's stripped France of its prized triple-A rating, citing an uncertain
fiscal outlook in the euro zone's second biggest economy, and said Italy's
banking outlook remained negative.
    Three-month copper on the London Metal Exchange ended down 0.26
percent at $7,783 a tonne at the close, with gains for the year standing at
around 2 percent. 
    The move marked a retreat from two-week highs in the previous session, hit
after data showing unexpected vitality in the U.S. housing market and a gauge of
home builder sentiment climbed to a six-year high. Construction is a significant
market for copper.   
    There was more positive data from the U.S. housing market on Tuesday showing
housing starts rose to their highest rate in more than four years in October.
 
    But the bullish housing news was already priced into the market, said Nic
Brown, head of commodities research at Natixis. "It does rather feel as though
the market took one look at all of this and said, OK, we know all that," he
said.
    "The market has struggled to sustain any kind of optimism ... It is a
difficult market at the minute and for the base metals that is probably because
we are in an environment where demand has been quite weak for a period now and
stock piles are high and it takes more than a bit of positive sentiment to
sustain a rally," he added.
    Brown said he was saw signs of a more sustained rally in 2013, built on
fresh demand in U.S. housing and positive signs in China, the world's largest
consumer of copper.
    The dollar index was up slightly, making dollar-priced metals pricier for
Europe and and other non-U.S. market participants. The greenback was flat versus
the euro however, ahead of the euro zone finance ministers meeting on Greece. .
 
    
    CHINA HOUSE PRICES
    Copper gleaned little support from news out of China, where home prices in
the world's top copper consumer rose 0.05 percent in October from September,
adding to evidence of a recent, mild recovery in the 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.
    Three-month aluminium ended down at $1,963 per tonne 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.
    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. 
    Bucking the downtrend in metals, nickel closed up at $16,600 a tonne
from $16,418, after breaking above key technical resistance levels.
    "The big number (for nickel) will be the 100 day moving average at $16,543.
A break and close above there will likely bring short covering back to the
market with an initial target of the 200 day moving average," said RBC Capital
Markets in a note. 
    Three-month tin was closed flat at $20,800 a tonne, while zinc
 ended down at $1,940 a tonne from $1,937.
    Three-month lead closed down at $2,171 a tonne from $2,180. 
 Metal Prices at 1721 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       352.15       -0.60     -0.17     334.65      5.23
  LME Alum      1963.00      -14.00     -0.71    2230.00    -11.97
  LME Cu        7782.00      -21.00     -0.27    7375.00      5.52
  LME Lead      2170.00      -21.00     -0.96    2432.00    -10.77
  LME Nickel   16600.00      175.00     +1.07   18525.00    -10.39
  LME Tin      20800.00        0.00     +0.00   16950.00     22.71
  LME Zinc      1939.50       -6.00     -0.31    2560.00    -24.24
  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