METALS-Copper down slightly on U.S. fiscal cliff uncertainty

Mon Dec 17, 2012 12:30pm EST

* Economic data improves but no fundamental progress yet-analyst
    * Nearby tightness in aluminium intensifies
    * Cash premium over January aluminium as wide as $70


    By Silvia Antonioli and Stephen Eisenhammer
    LONDON, Dec 17 (Reuters) - Copper edged lower on Monday, weighed down by
uncertainty over the ability of the United States to avert a "fiscal cliff" of
tax increases and spending cuts, which could slow growth and hit global metals
demand.    
    Benchmark copper on the London Metal Exchange closed down 0.1
percent at $8,060 from $8,065 at Friday's close.
    In the first real movement in budget deficit negotiations to avoid the
fiscal cliff, U.S. House of Representatives Speaker John Boehner, offered to
accept a tax rate increase for Americans earning over $1 million.
 
    "The market is still consolidating in a very narrow range because people are
waiting for fundamental signals to kick off; we still haven't seen that. It will
probably continue like this until there is an agreement in the U.S. to avoid the
fiscal cliff," VTB Capital analyst Andrey Kryuchenkov said.
    The metals market found some support in Friday's data pointing to growth in
both China's vast manufacturing sector and U.S. factory activity, but this still
has to translate into an improvement in metals fundamentals. 
    "We have got to see the stock shrinking in China. We have got to see
premiums spiking, a narrowing contango at the front end of the curve in London
and China, and that will not happen until the start of next year anyway, so the
rest of the year will be dominated by fiscal cliff news," Kryuchenkov said.    
    Solid growth from the United States will be crucial to reviving the world
economy and driving demand for commodities in 2013, particularly with a debt
crisis still grinding on in the euro zone.
    China, the world's second-largest economy, will maintain steady economic
polices in 2013, enabling it to manoeuvre in the face of global risks, while
deepening reforms to support long-term growth, the official Xinhua news agency
said on Sunday. 
    China, which is the world's largest consumer of industrial metals, buys
about 40 percent of global copper supply.
    Investors are now focusing on NY Fed manufacturing data later this session
for further clues on the state of the U.S. economy.
    
    ALUMINIUM TIGHTNESS
    Three-month aluminium slipped to $2,105.50 at close of trade, from a
last bid of $2,122 on Friday.
    The premium of its cash price against the three-month prices, meanwhile,
rose to $38, the highest in more than 18 months. 
    Tightness is being driven by a supply shortage over December-January, for
which there are still some holders of short positions who cannot find metal to
deliver.
    The cash premium over the January contract, which now incorporates the
December contracts that expire on Wednesday, rose to $70 at 1703 GMT from an
opening price of $40. 
     "The spread could potentially get wider. We haven't run down to the wire
yet. The wire happens tomorrow at noon when people have to get out or deliver,"
a London-based broker said. 
    The current squeeze is unlikely to have long-lasting impact on the curve.
    "What normally happens is that this backwardation lasts for two or three
days and then the situation dissipates," the broker added. 
    Although LME aluminium stocks have hit successive record highs
around 5.2 million tonnes over the past month, much of the metal is tied up in
long warehouse queues and is unavailable to the market.    
    In other metals, zinc, used to galvanize steel, closed at $2,090
unchanged from Friday's close, while battery material lead was bid at
$2,300 up 0.2 percent from $2,296.
    Tin closed up 0.7 percent at $23,300, from $23,150, and stainless
steel ingredient nickel was 1.5 percent lower at $17,605, from $17,875.
   
 Metal Prices at 1710 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       366.10       -1.10     -0.30     344.75      6.19
  LME Alum      2105.75      -20.25     -0.95    2020.00      4.25
  LME Cu        8059.25       -5.75     -0.07    7600.00      6.04
  LME Lead      2311.00       15.00     +0.65    2034.00     13.62
  LME Nickel   17700.00     -175.00     -0.98   18650.00     -5.09
  LME Tin      23300.00      150.00     +0.65   19200.00     21.35
  LME Zinc      2092.50        2.50     +0.12    1845.00     13.41
  SHFE Alu     15405.00      -20.00     -0.13   15845.00     -2.78
  SHFE Cu*     58130.00      290.00     +0.50   55360.00      5.00
  SHFE Zin     15625.00       70.00     +0.45   14795.00      5.61
 ** 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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