METALS-Copper slips along with euro on Draghi comments

Thu Feb 7, 2013 12:38pm EST

* ECB head Draghi's comments on euro zone economy hit currency
    * Commerzbank says metals correction not likely to last long
    * Volumes thin ahead of week-long Lunar New Year holiday
    * Coming up: Chinese trade data on Friday


    By Susan Thomas and Eric Onstad
    LONDON, Feb 7 (Reuters) - Copper edged lower on Thursday, undermined by a
weaker euro following comments by the head of the European Central Bank (ECB),
while volumes were moderate ahead of the Lunar New Year holiday in top metals
consumer China.
    An improved outlook for the global economy this year, reflected in positive
data from China and the United States, helped lift copper prices earlier this
week, although the optimism has yet to translate into strong physical demand.
    Copper hit a four-month high on Monday. 
    But metals were hit when the euro fell to a one-week low against the
dollar and sank against the yen on Thursday after ECB President Mario Draghi
said risks to the bank's outlook for the euro zone were to the downside. 
    A stronger dollar makes metals more expensive for holders of other
currencies. 
    Draghi also said the bank will monitor the impact of a strengthening euro on
the currency bloc's economy but said it was not a policy target. The ECB, as
expected, held its main interest rate at a record low of 0.75 percent.
    
    Three-month copper on the London Metal Exchange closed down 0.55
percent at $8,200 a tonne. Turnover at the end of ring trading was 12,014 lots,
much lower than the full-session average of 20,069 last week although close to
the average over the last month of 14,879. 
    "If you look at the prices over the last week or two, it's come alongside
builds in inventories, and fundamentals haven't really started to improve yet,"
Barclays analyst Gayle Berry said.
    LME copper stocks have climbed over 80 percent since
mid-October.
    "That said, I think the market is definitely getting a bit more positive on
global growth prospects for this year, and in particular I think people are
hanging about waiting to see what happens after Chinese New Year, to see if
there will be a bit of a pickup in physical activity "
    The Lunar New Year holiday starts this weekend and Chinese markets are
closed all next week.
    "CTA (commodity trading advisers) activity has been dominating the market
from both sides of the tape. The recent bullish breakouts in the complex were
met with good buying from the CTAs which lasted up until early yesterday," RBC
said in a research note. 
    Many CTA funds track momentum and jump into markets when they see trends
developing.  
    Investors also waited for China's trade numbers on Friday. Copper imports
could recover slightly in January after falling in December, although
near-record stocks in Shanghai will keep any increase modest. 
    
    ZINC STILL IN UPTREND
    Three-month zinc gave up 0.3 percent to close at $2,163 a tonne, but
Triland Metals said it was still in an uptrend based on technical indicators.
    "It still holds in technically bullish territory however, well above the
important moving averages (MA). Indeed, the 50-day MA is about $100 below the
current price so zinc could dip quite considerably from here without threatening
the uptrend," Triland said in a note.
    Unlike zinc, however, nickel has failed to establish a footing above last
autumn's highs, Commerzbank said in a note. 
    "With a sharp rise in nickel supplies there is only limited scope for price
gains. LME inventory figures have been rising steadily since November 2011 and
at just under 151,000 tonnes are at their highest level since April 2010, so
supplies are obviously ample."
    Nickel finished 0.8 percent lower at $18,180 a tonne, well below a
high of $18,920 touched in October.
    Other metals are likely to bounce back, Commerzbank added. "For the metal
sector overall, though, we do not envisage the correction process lasting much
longer in a climate of improving economic data. Any setbacks to prices will no
doubt be seen by market players as a chance to buy."          
    Three-month tin ended down 0.7 percent at $24,675 a tonne, while
lead fell 0.6 percent to $2,408. Aluminium did not trade in
closing rings but was bid at $2,098 at tonne, unchanged from Wednesday. 
    
 Metal Prices at 1711 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       372.65       -1.40     -0.37     365.25      2.03
  LME Alum      2099.00      -12.00     -0.57    2073.00      1.25
  LME Cu        8201.75      -43.25     -0.52    7931.00      3.41
  LME Lead      2408.00      -14.00     -0.58    2330.00      3.35
  LME Nickel   18154.00     -166.00     -0.91   17060.00      6.41
  LME Tin      24650.00     -200.00     -0.80   23400.00      5.34
  LME Zinc      2159.00      -11.00     -0.51    2080.00      3.80
  SHFE Alu     15090.00      -55.00     -0.36   15435.00     -2.24
  SHFE Cu*     59460.00     -230.00     -0.39   57690.00      3.07
  SHFE Zin     15745.00     -140.00     -0.88   15625.00      0.77
 ** 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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