METALS-Copper hits 1-month low, China traders still absent

Wed Feb 20, 2013 12:36pm EST

* Chinese buying quiet after holiday
    * Dollar gains versus euro
    * US data points to modest economic improvement

    By Harpreet Bhal
    LONDON, Feb 20 (Reuters) - Copper prices fell on Wednesday to their lowest
in more than a month, dragged down by persistent demand concerns as post-holiday
buying from top consumer China remained subdued, and with a strong dollar also
weighing on prices. 
    Benchmark three-month copper on the London Metal Exchange (LME),
untraded at the close, was bid at $7,960 a tonne, having fallen below the
psychologically significant $8,000 tonne to hit its lowest level since Jan. 17
at $7,954 earlier.
    Trade from China - which accounts for 40 percent of global copper demand -
remained quiet, with some manufacturers yet to ramp up after the Lunar New Year
holiday, suggesting prices may have further to fall, market sources said.
    Copper hit a four-month peak of $8,346 in early February but has since
struggled to gain traction. It is trading 2.5 percent lower so far this month.
    "What we have seen so far is a relatively subdued pace since the Chinese
have come back and we haven't seen prices take off at all," said Ross Strachan,
economist at Capital Economics. 
    "One of the key elements to look for is the flash PMI for China and euro
zone, and that could be interesting data. We have seen many of the PMIs improve
in recent months and it would be interesting to see whether they continue to
pick up." 
    The euro zone manufacturing and services PMI figures are expected on
Thursday while China's flash HSBC manufacturing PMI numbers are due on Monday. 
    Copper, used widely in power and construction, even failed to get a fillip
from U.S. data that pointed to a continuation of modest economic improvement.
    Groundbreaking to build new U.S. homes fell 8.5 percent in January but new
permits for construction rose to a 4-1/2-year high while producer prices rose in
January for the first time in four months. 
    But more than offsetting this was the absence of Chinese buyers coupled with
news that China is set to expand its property tax programme, state news agency
Xinhua said on Wednesday, in the government's latest bid to cool frothy home
prices. 
    "For the physical market, I expect demand will remain quiet until next week
because many downstream users like copper cable manufacturers and small copper
rod producers have not come back to work. Only after the Lantern Festival will
it pick up," said Chunlan Li, a Beijing-based analyst with metals consultancy
CRU.
    China's Lantern Festival falls on Feb.24 and marks the end of the lunar new
year festivities. 
    Also putting pressure on prices was a rise in the dollar versus the euro. A
strong dollar makes commodities priced in the U.S. unit more expensive for
holders of other currencies. 
          
        
    FED IN FOCUS
    The market is expected to closely monitor policy direction from the U.S.
Federal Reserve, which is set to release minutes of its Federal Open Market
Committee meeting after markets close on Wednesday.
    The Fed will likely need to keep buying bonds until the end of this year
given the still-feeble state of the U.S. labour market, a top Fed official told
Reuters on Tuesday. 
    Also in focus is Italian polls on Feb. 24-25, where the outcome is still
deeply uncertain. 
    In industry news, miner BHP Billiton appointed its  non-ferrous
business head Andrew Mackenzie as its new chief executive to replace Marius
Kloppers, as it reported an expected 43 percent drop in half-year profit. It
also took a $3 billion charge on its alumina and nickel assets. 
    Benchmark aluminium closed at $2,103 a tonne from Tuesday's close of
$2,111, and zinc closed at $2,133 from $2,155.
    Three-month tin closed at $23,725 a tonne from $23,905, and nickel
 at $17,170 a tonne from $17,390. It earlier fell to its lowest level
since late November at $16,970 a tonne. 
    Lead closed at $2,350 a tonne from a last bid of $2,375 on Tuesday.
    
 Metal Prices at 1722 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       360.90       -4.05     -1.11     365.25     -1.19
  LME Alum      2101.50       -9.50     -0.45    2073.00      1.37
  LME Cu        7965.00      -85.00     -1.06    7931.00      0.43
  LME Lead      2351.50      -38.50     -1.61    2330.00      0.92
  LME Nickel   17000.00     -390.00     -2.24   17060.00     -0.35
  LME Tin      23711.00     -194.00     -0.81   23400.00      1.33
  LME Zinc      2136.00      -19.00     -0.88    2080.00      2.69
  SHFE Alu     15080.00      -35.00     -0.23   15435.00     -2.30
  SHFE Cu*     58660.00     -230.00     -0.39   57690.00      1.68
  SHFE Zin     15975.00      175.00     +1.11   15625.00      2.24
 ** 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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