METALS-Copper dips on dollar, U.S. budget talks

Fri Dec 28, 2012 12:37pm EST

* U.S. fiscal talks resume on Friday, Jan. 1 deadline nears
    * China Dec factory activity expanded at fastest in 8 months -survey
    * U.S. Midwest business activity grows slowly

    By Susan Thomas and Silvia Antonioli
    LONDON, Dec 28 (Reuters) - Copper fell slightly on Friday on a stronger
dollar and uncertainty over the outcome of a last-chance round of U.S. budget
talks, but signs that top consumer China's economy is recovering limited losses.
    The metal was also supported by reports that workers at the world's biggest
copper mine, Chile's Escondida, had rejected an early pay offer, although
current contracts remain in force until June next year.
    Three-month copper on the London Metal Exchange finished at $7,886 a
tonne, down from $7,915 at the close on Thursday.
    "Copper has held up quite well this week considering the ever closer 'fiscal
cliff' story," said Stephen Briggs, an analyst at BNP Paribas. "The single
biggest reason is that it had perhaps become oversold compared with the other
base metals."
    Copper fell almost 2 percent last week and is up just 4 percent so far this
year, while three-month zinc has risen 12 percent.
    But there were signs the economy in China is steadily recovering, with a
Reuters survey showing the country's factory activity this month probably
expanded at its fastest pace in eight months.
    The survey showed that the official purchasing managers' index (PMI) in
December, due at 0100 GMT on Jan. 1, may have hit 51.0 from November's 50.6.
 
    "The market reacted well to China easing investment restrictions and
approving infrastructure programs. That said, Europe is still a mess, and in the
U.S. the fiscal cliff is still a question mark," RBC metals director Randy North
said. 
    The most-traded April copper contract on the Shanghai Futures Exchange
 closed up 0.2 percent at 57,680 yuan ($9,200) a tonne, gaining 1.8
percent for the week.
   "Shanghai copper has been leading the gains this month thanks to renewed
confidence after the leadership transition in Beijing," said Chen Dixi, an
analyst at Jinrui Futures in the southern Chinese city of Shenzhen.
    But Chen cautioned that the initial boom in copper demand may fade as
Beijing is adamant about curbing speculative investment in the property sector
and shifting the economy away from a resource-heavy pattern of development.
   "After all, China is trying to adjust the structure of its economy, and the
global economic recovery is far from certain," Chen said.
    
    FISCAL CLIFF
    Copper was little changed after mixed economic data from the Unites States.
    Contracts to buy previously owned U.S. homes rose in November to their
highest level in 2-1/2 years, evidence of a strengthening housing market
recovery. 
    The index of Midwest business activity rose in December, the Institute for
Supply Management-Chicago said, but the level still implied very low growth.
    
    In the meantime, President Barack Obama and lawmakers launched a last-chance
round of budget talks days before a New Year's deadline to reach a deal or watch
the economy go off the so-called "fiscal cliff". 
    Obama and Vice President Joe Biden were due to meet congressional leaders
from both parties at the White House on Friday at 3 p.m. EST (2000 GMT) to try
to revive negotiations to avoid tax hikes and spending cuts amounting to $600
billion, which begin to take effect on Jan. 1. 
    The euro turned lower against the dollar, with investors cautious as
they waited to see the outcome of the U.S. budget talks. 
    A stronger dollar makes metals priced in the U.S. unit more expensive for
holders of other currencies.
    Also putting pressure on copper, top supplier Chile produced 478,545 tonnes
of copper in November, up 2.6 percent from a year earlier, easing concerns about
dwindling ore grades in many aging deposits. 
    "This (supply increase) might have a little impact on the market in the near
term, but over the longer term copper is still going to be in a deficit and the
price reflects that, as it is trading so high above the marginal cost of
production," North said.  
    In other metals, three-month zinc ended at $2,052.50 a tonne from $2,102 at
the close on Thursday, and nickel at $17,200 from $17,275.
    Three-month tin was untraded in the final ring but was last bid at
$23,300 from $23,400 at Thursday's close.
    Lead closed at $2,335, unchanged from Thursday's close and aluminium
 finished at $2,063 from $2,080.
 Metal Prices at 1719 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       359.00       -0.65     -0.18     344.75      4.13
  LME Alum      2064.00      -16.00     -0.77    2020.00      2.18
  LME Cu        7895.25      -19.75     -0.25    7600.00      3.88
  LME Lead      2322.25      -12.75     -0.55    2034.00     14.17
  LME Nickel   17195.00      -80.00     -0.46   18650.00     -7.80
  LME Tin      23275.00     -125.00     -0.53   19200.00     21.22
  LME Zinc      2055.75      -46.25     -2.20    1845.00     11.42
  SHFE Alu     15345.00       -5.00     -0.03   15845.00     -3.16
  SHFE Cu*     57580.00      130.00     +0.23   55360.00      4.01
  SHFE Zin     15545.00      -40.00     -0.26   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
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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