METALS-Copper gains on China economic outlook, dollar's fall

Thu Nov 22, 2012 12:24pm EST

* China HSBC Flash Manufacturing PMI hits 13-month high in Nov
    * Euro climbs to two-week high vs dollar
    * U.S. markets closed for Thanksgiving holiday


    By Harpreet Bhal and Eric Onstad
    LONDON, Nov 22 (Reuters) - Copper rose on Monday after a manufacturing
survey from top consumer China boosted optimism about the pace of economic
recovery, with a weaker dollar against the euro also helping to lift metals
prices.
    Three-month copper on the London Metal Exchange closed at $7,715 a
tonne, from $7,692 at the close on Wednesday. Trading volumes were light due to
the Thanksgiving holiday in the United States.
    In the LME rings, activity was also dampened after Barclays decided to quit
floor trading and move all base metals operations to its electronic platform.
 
    Copper has struggled over the past two months to break a downtrend, giving
up 8 percent since touching a peak of $8,422 on Sept. 19.
    It surged on Monday in the biggest daily gain in two months on hopes for a
solution to the U.S. fiscal cliff problem of $600 billion tax hike and spending
cuts that are due to roll in early next year, but then lost momentum. 
    Investors took heart on Thursday when preliminary results from a factory
survey showed that expansion in China's manufacturing sector accelerated in
November for the first time in 13 months, a sign that the pace of economic
growth has revived after seven consecutive quarters of slowdown. 
   
    "Any support for copper today will have quite a lot to do with China  ... it
was another data point that suggests that, at last, things are starting to get
better," said Nic Brown, head of commodities research at Natixis.  
    Analyst Janet Kong at China International Capital Corporation said copper
consumption was expected to gradually improve. "We expect supply-side pressure
to remain in the near term before a more significant pickup in demand, probably
in 2Q13," she said in a note.
    "Overall, we forecast China's copper consumption to grow 4.1 percent in 2012
and improve to 4.9 percent in 2013 on better economic growth and destocking
coming to an end."
    The Chinese report followed data on Wednesday showing U.S. manufacturing
grew in November at its quickest pace in five months, with a rise in domestic
demand hinting that factories could provide a boost to economic growth in the
fourth quarter. 
    Also helping to lift prices was a strong euro, which rose on expectations a
Greek funding deal would eventually be agreed and after data showed
manufacturing activity in the euro zone slowed less than expected in November.
It hit a two-week high against the dollar. 
    A weak dollar makes commodities priced in the U.S. unit cheaper for holders
of other currencies. 
    Brown at Natixis said he expected copper prices to rise further in 2013,
partly due to positive signs in the U.S. housing market. 
    "Our forecast for copper prices expect an average of about $8,500 a tonne in
2013. We would expect a peak in prices in the first half of the year since
supply will gradually improve as we get closer to 2014," Brown added.
      
    
    INVESTORS PULL BACK
    Open interest in most LME metals has declined in recent days as uncertainty
and lack of strong direction curbs investor appetite.
    One of the biggest moves has been in zinc, where open interest 
jumped 15 percent in the month up to Nov. 16, but over the past week has slid
7.3 percent to 288,069 lots.
    Open interest in aluminium has shed about 9 percent since the
start of the month. 
    In trading, three-month aluminium closed at $1,944.5 a tonne from
$7,692 and zinc at $1,925 from $1,917.
    Battery material lead closed at $2,165 a tonne from $2,150 and
stainless steel ingredient nickel at $16,550 from $17,000. Soldering
metal tin, untraded in rings, was bid at $20,455 from $20,425.
    
 Metal Prices at 1707 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       350.05        0.45     +0.13     344.75      1.54
  LME Alum      1942.75       12.75     +0.66    2020.00     -3.82
  LME Cu        7715.50       23.50     +0.31    7600.00      1.52
  LME Lead      2163.25       13.25     +0.62    2034.00      6.35
  LME Nickel   16545.00     -455.00     -2.68   18650.00    -11.29
  LME Tin      20460.00       35.00     +0.17   19200.00      6.56
  LME Zinc      1923.50        6.50     +0.34    1845.00      4.25
  SHFE Alu     15335.00       30.00     +0.20   15845.00     -3.22
  SHFE Cu*     56040.00      140.00     +0.25   55360.00      1.23
  SHFE Zin     14995.00       45.00     +0.30   14795.00      1.35
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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