METALS-Copper consolidates after fiscal cliff progress

Tue Dec 18, 2012 12:19pm EST

* Battle in aluminium sparks stock deliveries
    * Tin rises to highest in 8-1/2 months
    * Any rallies curtailed by lack of risk appetite - analyst


    By Eric Onstad and Stephen Eisenhammer
    LONDON, Dec 18 (Reuters) - Copper consolidated gains on Tuesday, following a
one-month rise, as progress in negotiations to avert a U.S. budget crisis eased
fears the world's biggest economy could tip into recession.
    The prospect of a deal to head off automatic spending cuts and tax hikes may
already be partly priced into the copper market, which has gained about 6
percent since mid-November, compared with falls of about 1 percent in spot gold
 and 2.5 percent in Brent crude oil.
    Many markets rallied after news emerged on Monday night that differences
over resolving the fiscal cliff had narrowed significantly as President Barack
Obama made a counter-offer to Republicans that included a major change in
position on tax hikes for the wealthy. 
    But three-month copper on the London Metal Exchange gave up its
gains in morning trading and was bid at $8,024 per tonne, down 0.5 percent.
Copper closed nearly flat on Monday.
    "The equities reacted favourably last night to this in New York, and
logically one would assume that this would be a positive for commodities as
well," said Stephen Briggs, metals strategist at BNP Paribas in London.
    "But because base metals have been faring pretty well in the last few weeks,
there may be less mileage for them than there might be for some other sectors."
    Signs of a revival in economic growth in top consumer China, which accounted
for 40 percent of refined demand last year, have also boosted copper in recent
weeks. 
    Further support was expected following the approval on Monday by U.S.
regulators of JPMorgan Chase & Co's controversial plan to launch a
copper exchange-traded fund backed by actual metal stockpiles. 
    Stocks for the ETF will be held in non LME-registered warehouses, where
costs are cheaper, with Shanghai one of the suggested locations.
    But the boost from the announcement could take some time to be felt in the
market.
    "We could still be some months away from the prospectuses being posted out
and investors starting to buy, so it looks a bit of a slow burner," Robin Bhar,
an analyst at Societe Generale, said.
    Bhar added that investors were sitting out until the so-called "fiscal
cliff" impasse was resolved.    
    "The rally for the moment is probably curtailed by a lack of any risk
appetite until the fiscal cliff gets sorted out," he said. 
    "The prospects for next year are looking pretty good. China is rebounding
and if the fiscal cliff can be resolved quickly ... everything bodes well for a
continued recovery in the U.S."

    ALUMINIUM BATTLE
    A market battle in aluminium on the LME between a major long holder and
shorts sparked hefty deliveries of stocks into warehouses, which erased heavy
premiums for cash material seen in recent days.
    Cash spiked to a premium of up to $47 a tonne over the benchmark three-month
contract on Monday, the strongest since February 2007, but then
flipped to a discount of $15 on Tuesday.
    Analysts said the move back into its usual contango structure, in which cash
prices are lower than longer-dated ones, came after short-holders delivered
aluminium into LME warehouses. LME aluminium stocks have jumped
by 64,325 tonnes over the past two days.
    "There are millions of tonnes of unreported inventory of aluminium that have
built up in the last five years, so there's plenty of scope for more material to
hit the market," Briggs said.
    The increase in LME stocks appeared to weigh on three-month aluminium
, which fell 0.4 percent to $2,098 per tonne in official trading.
    Other metals fared better.
    Tin, which many analysts expect to be the only base metal with a
deficit next year, gained 1 percent to $23,525 per tonne at the close of
official trading, the highest in eight and a half months.
    Zinc closed at $2,090 a tonne, unchanged from Monday's close.
    Lead finished up 0.8 percent at $2,319 a tonne and nickel 
climbed 1.1 percent to $17,800.
    
 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       364.35       -1.10     -0.30     344.75      5.69
  LME Alum      2101.50       -4.00     -0.19    2020.00      4.03
  LME Cu        8021.50      -38.50     -0.48    7600.00      5.55
  LME Lead      2315.25       19.25     +0.84    2034.00     13.83
  LME Nickel   17788.00      183.00     +1.04   18650.00     -4.62
  LME Tin      23470.00      170.00     +0.73   19200.00     22.24
  LME Zinc      2088.25       -1.75     -0.08    1845.00     13.18
  SHFE Alu     15300.00     -105.00     -0.68   15845.00     -3.44
  SHFE Cu*     57880.00     -250.00     -0.43   55360.00      4.55
  SHFE Zin     15545.00      -80.00     -0.51   14795.00      5.07
 ** 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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