METALS-Copper steady as global macro signals improve

Mon Jan 21, 2013 12:33pm EST

* Weak physical demand from China holds back copper
    * U.S. debt ceiling impasse thaws; Europe shares rise
    * China cold snap drives lead battery demand - Deutsche


    By Maytaal Angel and Eric Onstad
    LONDON, Jan 21 (Reuters) - Copper was little changed in thin trade on Monday
as a political attempt to break a budget impasse in the United States revived
risk appetite, but was offset by still weak physical demand from top consumer
China.
    Three-month copper on the London Metal Exchange edged down 0.1
percent to close at $8,055 a tonne in low volumes due to a U.S. market holiday
for Martin Luther King day.
    Copper volume was 4,764 lots by the close of floor trading, compared to an
average daily volume of 13,081 over the past two months. Copper hit a one-week
high of $8,130 a tonne in the previous session before closing the week more or
less unchanged.
    U.S. House Republican leaders said on Monday they would seek to pass a
four-month extension of federal borrowing authority on Wednesday to buy time for
the Democrat-controlled Senate to pass a plan to shrink budget deficits.
 
    European shares, seen by some as a proxy for growth, inched towards two-year
highs in response on Monday, but investors were more cautious about sending
copper to new highs given Chinese physical metal buying remains weak.
    Data out earlier showed imports of refined copper by China, which consumes
some 40 percent of the world's supplies of the metal, dropped 4.7 percent in
December from November, though they were up 20 percent for 2012 as a whole.
 
    "On the macro side base metals have even in the short term a bullish
scenario, what is holding them back is actually the physical market. Many people
say we have to wait until after the Chinese new year and probably they're
right," said Gianclaudio Torlizzi, partner at metals consultancy T-Commodity.
    "I'm not that worried about the general level of stocks (in China) because
there's big question marks about availability of these stocks," he added.
    The Chinese trade data also showed exports of refined copper surged 75.3
percent to a record 274,014 tonnes in 2012.
    "Given the current overhang of Chinese bonded inventory, and recent changes
in terms of tax environment and the granting of export licences, higher levels
of Chinese refined exports are likely to remain a feature of the market at least
during early 2013," said Leon Westgate at Standard Bank in London.     
    China's Lunar New Year holiday begins Feb. 11, while markets will reopen on
Feb. 18. 
    After strengthening to 2-1/2-month highs near $8,250 a tonne at the
beginning of the year, copper prices have struggled to find momentum and last
week touched a 2013 trough at $7,920 a tonne.

    WAITING FOR THE CHINESE NEW YEAR
    Reflecting diminished appetite for metals from investors, hedge funds and
money managers cut bullish bets in copper in the week to Jan. 15, Commodity
Futures Trading Commission data showed on Friday. 
    On the plus-side though, investors remain mindful that China's economy
picked up steam in the fourth quarter, data showed last week, as infrastructure
spending and a jump in trade signalled the foundation for a stable growth path.
    "We still like the base metals and are looking for higher prices in Q1, but
we may have to wait until after the Chinese New Year holidays in February for a
decent rally to materialise now," said RBC Capital in a research note.
    Lead was bid at $2,300 a tonne at the close, down $1 from Friday's
close and off nearly 2 percent on the year, though Deutsche Bank said a severe
cold spell in China could fuel a resurgence in demand for the metal used in
battery making.
    "We believe that the lead market could be one of the more attractive long
opportunities this year. We would recommend buying on weakness," it said.
    Soldering metal tin, the best base metals performer last year, was
bid at $25,000 a tonne at the close, down 0.1 percent.
    "Tin has continued its march upwards, although having risen 30 percent from
the low of late October, it has lost a little momentum. After such large gains,
a correction is possible, even likely. The LME-Shanghai arbitrage still does not
favour Chinese exports but it is getting closer," said BNP Paribas in a note.
    Zinc, used in galvanizing, fell 0.1 percent to close at $2,031.50 a
tonne, aluminium was bid 0.2 percent weaker at $2,040.50 a tonne, while
stainless-steel ingredient nickel, the worst performer on the LME last
year, finished 1.0 percent weaker at $17,380 a tonne.
    Barclays said in a note nickel prices were set to continue trending lower,
weighed down by an increase in nickel pig iron, the lower nickel content
substitute used by China increasingly in lower grades of stainless steel. 
    The bank forecast NPI production rising to 300,000 tonnes this year from
265,000 in 2012.
    
 Metal Prices at 1713 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2012   Ytd Pct
                                                              move
  COMEX Cu       365.80       -1.15     -0.31     365.25      0.15
  LME Alum      2040.75       -3.25     -0.16    2073.00     -1.56
  LME Cu        8059.75       -1.25     -0.02    7931.00      1.62
  LME Lead      2298.50       -2.50     -0.11    2330.00     -1.35
  LME Nickel   17425.00     -125.00     -0.71   17060.00      2.14
  LME Tin      24975.00      -50.00     -0.20   23400.00      6.73
  LME Zinc      2032.50       -1.50     -0.07    2080.00     -2.28
  SHFE Alu     15255.00      -30.00     -0.20   15435.00     -1.17
  SHFE Cu*     58190.00     -190.00     -0.33   57690.00      0.87
  SHFE Zin     15365.00      -55.00     -0.36   15625.00     -1.66
 ** 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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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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