METALS-Copper slips on uncertain demand outlook

Wed Dec 19, 2012 11:08am EST

* Tin best performer in 2012 so far, up 22 pct
    * Lead hits highest since mid-September 2011
    * US housing construction starts fall in November


    By Harpreet Bhal and Stephen Eisenhammer
    LONDON, Dec 19 (Reuters) - Copper slipped on Wednesday due to uncertainty
about the outlook for demand, furthered by a fall in the number of U.S. house
building projects being started in November, while investors continued to watch
U.S. budget talks closely.
    Analysts said physical demand remained sluggish for the metal used in power
and construction as the year draws to a close, keeping prices in a tight range.
    "As we approach the end of the year, there is some book-squaring activity
going on, and people have been taking profits, so copper has drifted lower,"
Andrey Kryuchenkov, an analyst at VTB, said. 
    "There is a good chance that we could see a last-minute deal in the U.S. to
avert a fiscal cliff. Provided that goes ahead, it would be good for the base
metals market. However, for the gains to be sustained for the likes of copper,
we need to see more evidence of improvement in spot demand." 
    Three-month copper on the London Metal Exchange (LME) traded at
$7,916 a tonne at 1528. It was untraded at the close on Tuesday but was bid at
$8,024 a tonne. 
    Traders said U.S. housing data added to investor uncertainty surrounding the
demand outlook for copper. The number of construction starts on houses fell 3
percent in November compared with the previous month, below economists'
expectations, data from the Commerce Department showed.   
    Copper fell to a session low of $7,912 per tonne following the announcement.
    Republicans tried to squeeze more concessions from the White House on taxes
in political manoeuvring for a deal that would prevent the U.S. economy from
going over the so-called "fiscal cliff" of tax hikes and spending cuts in the
new year. 
    Since a price rally of almost 8 percent from mid-November to a near
two-month high on Dec. 12, momentum has begun to fade, with traders cutting risk
and squaring positions ahead of year-end. The metal is up more than 5 percent
for the year. 
    "With market participants closing their books ahead of year-end, we wouldn't
really expect too big a change, especially in the industrial metals space, where
it seems there is a consolidation going on from the recent shift higher," Stefan
Graber, an analyst at Credit Suisse, said.
       
    
    TIN TOP PERFORMER 2012
    Also underpinning prices was a rise in the euro to a 7-1/2-month high
against the dollar after data showed German business sentiment climbed for a
second month running in December as confidence in the outlook surged more than
at any time in the last 2-1/2 years. 
    A weak dollar makes commodities priced in the U.S. unit cheaper for holders
of other currencies. 
    In industry news, some banks have tightened credit for imports of refined
copper by China, the world's largest consumer of the metal, as stocks pile up in
bonded warehouses and prices hover below London rates, reducing buying of the
metal and keeping premiums low. 
    In other metals, three-month tin hit its highest since mid-March at
$23,847, up from a close of $23,525 a tonne on Tuesday. It fell back to $23,480
at 1541 GMT.
    Tin has been the top performer of the base metals this year, up 22 percent,
and has been streaking ahead of the second-best performer, lead, which has
gained almost 14 percent. 
    Tin prices have hit successive eight-month highs for six of the last eight
sessions, boosted by longer term technical buying and short-covering, RBC
Capital said in a note. 
    "While the longer-term prospects for tin continue to look positive in terms
of price, the short-term risk would appear to have more downside than upside
potential, given the recent run," RBC said. 
    Lead hit its highest since mid-September 2011 at $2,347.75 a tonne,
before dropping back to 2,319.25 at 1534 GMT, unchanged from Tuesday's close.
    Zinc was at $2,076, down from a close of $2,090 a tonne, while
aluminium, fell to $2,093 from $2,098. Nickel was at $17,555
from Tuesday's close of $17,800.
    
 Metal Prices at 1538 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       359.50       -4.70     -1.29     344.75      4.28
  LME Alum      2093.50       -4.50     -0.21    2020.00      3.64
  LME Cu        7931.50     -128.50     -1.59    7600.00      4.36
  LME Lead      2325.25        6.25     +0.27    2034.00     14.32
  LME Nickel   17563.00     -237.00     -1.33   18650.00     -5.83
  LME Tin      23470.00      -55.00     -0.23   19200.00     22.24
  LME Zinc      2076.75      -13.25     -0.63    1845.00     12.56
  SHFE Alu     15290.00      -10.00     -0.07   15845.00     -3.50
  SHFE Cu*     57650.00     -230.00     -0.40   55360.00      4.14
  SHFE Zin     15460.00      -85.00     -0.55   14795.00      4.49
 ** 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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