METALS-Copper falls after Fed announcement; fiscal worries drag

Thu Dec 13, 2012 5:58am EST

* Euro falls vs dollar
    * Copper, aluminium fundamentals weak
    * Coming Up: U.S. weekly jobless claims ; 1330 GMT

    By Silvia Antonioli
    LONDON, Dec 13 (Reuters) - Copper fell on Thursday on worries about a lack
of progress in talks to avert the "fiscal cliff" in the United States and after
the Federal Reserve tied its monetary policy to unemployment, raising concerns
over limits to its economic stimulus.
    Benchmark copper on the London Metal Exchange fell almost 1 percent
to $8,073 a tonne by 1029 GMT, from a last bid of $8,130 at the close on
Wednesday.
    Sharp differences remained between congressional Republicans and the White
House in negotiations to avoid the "fiscal cliff" of steep tax hikes and budget
cuts. 
    A failure to strike a deal could send the world's second-largest economy
back into recession, with negative implications for metals demand.  
    Some investors were also worried by the Fed's decision to link its monetary
stimulus to unemployment and inflation numbers, which could limit the length of
its intervention.
    The Fed said it plans to buy $45 billion in longer-term Treasuries each
month on top of its $40 billion monthly purchase of mortgage-backed securities
as expected, but set unemployment and inflation thresholds for its exit
strategy. 
    "The Fed has given some conditions and this has scared the market a bit. But
in my opinion the losses in metals have more to do with uncertainty on the
fiscal front than with disappointment on monetary easing," T-commodity
consultant Gianclaudio Torlizzi said.
    "After the gains in metal recently some investors are also closing their
positions and taking profit, worried that if a fiscal agreement is not found,
higher taxes could hit capital gains, too."
    Copper prices have risen more than seven percent in the last month and the
metal is now up by more than six percent on the year.
    Putting pressure on base metals, the euro fell to a session low against the
dollar, with traders reporting euro selling by long-term investors on top of
earlier selling by an Asian central bank. 
    A stronger U.S. dollar against the euro makes dollar-priced commodities such
as base metals costlier for holders of the euro.
    In industry news, Aurubis, Europe's biggest copper smelter, posted
earnings before taxes (EBT) of 516 million euros in its full 2011/12 fiscal year
ending Sept. 30, up from 497 million euros in the previous year. 
    
    WEAK FUNDAMENTALS
    Barclays suggested shorting base metals should the rally seen in the last
month continue, as fundamentals remain weak especially for aluminium and copper.
    "Aluminium fundamentals are the weakest for any base metal at present, but
price volatility tends to be quite low. Instead, we recommend shorting copper if
cash prices rise much above $8,500," it said in a research note.
    "A large stock overhang in China means its import demand will likely be
sharply down on year-ago levels, and following the recent abolition of export
taxes on tolled copper, there could be a steady stream of exports early next
year, which could turn market sentiment very negative."
    Aluminium was at $2,124 from $2,138 and battery material lead
 was at $2,299.75 from $2,322 .
    Zinc, used to galvanise steel was at $2,075.25 from $2,095
Wednesday's close while tin was at $22,990 from a last bid of $23,135. 
    Stainless steel material nickel was at $17,569 from $17,700.
    
    
 Metal Prices at 1034 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       366.85       -3.80     -1.03     344.75      6.41
  LME Alum      2123.50      -14.50     -0.68    2020.00      5.12
  LME Cu        8070.00      -33.00     -0.41    7600.00      6.18
  LME Lead      2299.25      -22.75     -0.98    2034.00     13.04
  LME Nickel   17570.00     -130.00     -0.73   18650.00     -5.79
  LME Tin      22950.00      -20.00     -0.09   19200.00     19.53
  LME Zinc      2074.75      -20.25     -0.97    1845.00     12.45
  SHFE Alu     15320.00       35.00     +0.23   15845.00     -3.31
  SHFE Cu*     57570.00     -330.00     -0.57   55360.00      3.99
  SHFE Zin     15355.00      -90.00     -0.58   14795.00      3.79
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07