METALS-Confidence in growth boosts copper, strong dollar weighs

Mon Feb 4, 2013 12:42pm EST

* Factory activity picks up in all three key global regions
    * Supply, Spain jobless still a worry
    * LME zinc hits one-year high, nickel at four-month high

    By Maytaal Angel and Harpreet Bhal
    LONDON, Feb 4 (Reuters) - Copper rose on Monday as confidence in the outlook
for growth increased after data pointed to strength in the U.S. economy and a
modest rebound in Chinese factory activity, but prices slipped from four-month
highs as the dollar gained.
    Benchmark copper on the London Metal Exchange ended at $8,305 a
tonne, up from Friday's close of $8,290 a tonne, but prices eased off four-month
highs of $8,346 hit earlier in the session.
    LME three-month zinc marked its highest in one year at $2,190 a
tonne, while LME nickel hit a four-month high at $18,770. 
    The global economic outlook brightened last week, when data showed U.S.
factory activity quickened in January and hiring increased.
    In the euro zone, a business activity survey suggested the worst of the
region's downturn may be over and Chinese factories extended a modest rebound.
 
    "If you have acceleration of growth (and) a better outlook for demand, I
don't think you have a massive risk of an impending correction. The only thing
that's missing is strengthening in the physical market," Merrill Lynch Bank of
America analyst Michael Widmer said.  
    In a sign of improved demand, open interest and volumes of LME copper last
week hit the highest this year. ,
    But a stronger dollar versus the euro and against a basket of currencies
trimmed copper's gains. A strong dollar makes commodities priced in the currency
more expensive for holders of other currencies. 
    Sentiment was also dampened by news from Spain where unemployment problems
were worsening, while a corruption scandal threatened to engulf Prime Minister
Mariano Rajoy.
    Copper, used in power and construction, gained nearly 3 percent in January.
It ended last week up 3.2 percent, its biggest weekly gains since September.
    "We think base metals will likely do better over the course of February and
continue to favour lead, tin, copper and zinc in that order," Edward Meir,
analyst at INTL FCStone said in a note. 
    "Although we are constructive on base metals over the short-term, we do not
see a return to any bull market type of conditions, as most complexes (apart
from lead and tin) are expected to be in surplus," he said, adding that China's
metal demand is expected to be steady but not strong.
       
        
    RISING STOCKS
    Markets in China, which accounts for 40 percent of refined copper demand,
will be closed next week for its New Year holiday celebrations, and participants
do not expect to see an uptick in demand before then.
    "China is largely out of the market ahead of the Lunar New Year holidays.
While the improving macro picture has underpinned metals, there is also the
perception that supply availability has increased to maintain the status quo,"
Societe Generale analyst Robin Bhar said.
    "No base metal is in backwardation right now as contango markets prevail.
Underlining this fact is that LME stocks are increasing for metals such as
copper, nickel and tin."
    'Backwardation' refers to a structure in the market where nearby prices are
higher than forward ones, signalling tight supply. Contango is the opposite.
    LME stocks data out earlier showed a 1,800 tonne dip in copper stocks to 374,200 tonnes, though they remained near their highest since
December 2011 and have increased by some 75 percent since October last year. 
    Three-month nickel ended at $18,725 from $18,625 at the close on
Friday while tin ended flat at $24,900 
    Zinc closed at $2,185 from $2,175 while aluminium ended at
$2,113 from $2,118. 
    A closing price for benchmark lead was unavailable due to a
technical glitch at the London Metal Exchange. It traded at $2,454.75 at 1737
GMT, up from a close of untraded at the close of $2,451 on Friday.
    
 Metal Prices at 1738 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       377.60       -0.85     -0.22     365.25      3.38
  LME Alum      2116.25       -1.75     -0.08    2073.00      2.09
  LME Cu        8299.50        9.50     +0.11    7931.00      4.65
  LME Lead      2455.25        4.25     +0.17    2330.00      5.38
  LME Nickel   18625.00        0.00     +0.00   17060.00      9.17
  LME Tin      24900.00        0.00     +0.00   23400.00      6.41
  LME Zinc      2180.25        5.25     +0.24    2080.00      4.82
  SHFE Alu     15220.00       30.00     +0.20   15435.00     -1.39
  SHFE Cu*     59710.00      420.00     +0.71   57690.00      3.50
  SHFE Zin     16040.00      130.00     +0.82   15625.00      2.66
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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