METALS-Copper gains on upbeat China data; U.S. talks weigh

Mon Dec 31, 2012 9:57am EST

* Copper rises more than 4 pct in 1212
    * HSBC China Dec manufacturing PMI highest since May 2011
    * Coming up: U.S. Dallas Fed Dec manufacturing index: 1530 GMT

    By Maytaal Angel and Rujun Shen
    LONDON/SINGAPORE, Dec 31 (Reuters) - Copper rose on Monday on upbeat
manufacturing data from China, ending the year up more than 4 percent, though
uncertainty over whether U.S. lawmakers will reach a deal to avert a fiscal
crisis kept the near-term outlook cloudy.
    World shares were steady on Monday, set to end the year up 13 percent as
U.S. politicians prepared for last-minute talks to avoid a fiscal crunch of
spending cuts and tax rises that could drag down the world economy in 2013.
 
    While hope has largely evaporated for any sort of broad deal, the lack of
panic on markets shows that investors expect officials to find a solution to the
budget problems early in the new year. 
    The measures that start in January will also have only a gradual impact.
    For metals investors, hopes centre on China, the world's top copper
consumer. 
    The HSBC Purchasing Managers' Survey earlier showed that December activity
in China's vast manufacturing sector hit its fastest rate since May 2011.
 
    Three-month copper on the London Metal Exchange rose to as high as
$7,970 - its highest since Dec. 19 - and was $7,929 in the final ring session of
the year. The metal rose more than 4 percent this year.
    "I think we'll see a rally in copper prices in the first quarter and I
wouldn't be surprised to see new money hitting commodities early next year as it
is still a good investment. I think the fiscal cliff will be resolved at some
point," said Randy North, director at RBC Capital Markets.
   Tin was the outstanding winner of the base metals complex this year, rising
almost 22 percent, helped by export bans by top exporter Indonesia and steady
demand by the electronics industry.
    Tin usage tends to stay fairly constant through recessionary periods, North
added, because people buy tinned food for its longer shelf life, which tends to
offset decreased usage in the electronics sector.DEFENSIVE
    After spending most of 2012 in a defensive crouch, cowed by past crises and
on guard against any future problems, more investors seem willing to take risks
in 2013 in search of greater reward, money managers say. 
    Recent U.S. data showed contracts for U.S. home resales hit their highest
level for two and a half years in November and factory activity in the Midwest
expanded in December, suggesting some strength in the economy. 
    "Investor sentiment is tremendously positive," said Ivan Szpakowski, an
analyst at Credit Suisse in Singapore. "But LME is held back by the 'fiscal
cliff' talks in the U.S. If we can get past that, the China story can become
more powerful in terms of driving global prices."
    In the face of uncertainty over the fiscal negotiations, hedge funds and
money managers had reduced their net long positions in U.S. copper futures and
options by nearly 40 percent in the week to Dec. 24, the U.S. Commodity Futures
Trading Commission said. 
    In other metals, aluminium, untraded in rings, was last bid at
$2,071 a tonne from $2,063 at the close on Friday. The metal gained less than 3
percent this year, reflecting chronic global oversupply.
    Rusal, the world's largest aluminium producer, and the government
of Guinea have signed a plan to develop the Dian-Dian bauxite deposit, which
will involve building an alumina refinery and gradually increasing ore output.
 
    Zinc traded at $2,064 in the final ring session, from $2,052.5 at
the close on Friday. The metal rose almost 12 percent this year.
    Lead, untraded in rings, was last bid at $2,340 a tonne and rose 15
percent this year. 
    Nickel traded at $17,155 per tonne from $17,200 on Friday. The
metal, used in making stainless steel, was the sole loser among the six base
metals, ending the year down 8 percent. Its underperformance reflects a sharp
drop in demand for stainless steel, particularly in Europe. 
    
 Metal Prices at 1415 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       361.85        3.35     +0.93     344.75      4.96
  LME Alum      2072.75        9.75     +0.47    2020.00      2.61
  LME Cu        7938.50       52.50     +0.67    7600.00      4.45
  LME Lead      2325.75       -9.25     -0.40    2034.00     14.34
  LME Nickel   17100.00     -100.00     -0.58   18650.00     -8.31
  LME Tin      23405.00        5.00     +0.02   19200.00     21.90
  LME Zinc      2076.50       24.00     +1.17    1845.00     12.55
  SHFE Alu     15365.00       20.00     +0.13   15845.00     -3.03
  SHFE Cu*     57770.00      190.00     +0.33   55360.00      4.35
  SHFE Zin     15520.00      -25.00     -0.16   14795.00      4.90
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07