METALS-Copper dips as post-Cyprus bailout cheer fades

Mon Mar 25, 2013 1:25pm EDT

* Cyprus move to tap depositors sets dangerous precedent
    * LME copper stocks highest in nearly 10 years
    * Speculative shorts reach four-year high on Comex

    By Maytaal Angel
    LONDON, March 25 (Reuters) - Copper fell on Monday as
investors lost enthusiasm for a last-ditch 10 billion euro
($13.00 billion) bailout deal reached by Cyprus and
international lenders, and were disappointed with modest demand
growth from top consumer China.
    Also weighing on the metal, the latest London Metal Exchange
data showed copper stocks in official warehouses rose 2,875
tonnes to 565,350 tonnes, their highest level in nearly 10
years. 
    Added to this, data on Friday showed copper stocks monitored
by the Shanghai Futures Exchange hit their highest in nearly 11
years, indicating demand in China, which consumes 40 percent of
the world's copper, remains subdued.
    Three-month copper on the London Metal Exchange 
ended at $7,620 a tonne, down from Friday's close of $7,655. 
    Cyprus clinched a last-ditch deal with international lenders
early on Monday morning to shut down its second-largest bank and
inflict heavy losses on uninsured depositors, including wealthy
Russians, in return for the bailout. 
    After initial relief at the news, investors grew wary as
unlike previous peripheral euro zone country bailouts, the
Cyprus deal tapped individual bank deposits, which up to now had
been protected.
    European shares trimmed gains while German Bund futures hit
a session high, after the head of the Eurogroup said the Cyprus
bailout deal could be a new template for resolving euro zone
banking problems. 
    "European banking regulators are trying to establish the
principal of a banking union, and they've undermined it by
saying in special cases we can ignore these rules and depositors
at banks can be hit," said Nic Brown, head of commodities
research at Natixis.
    Investors are now awaiting China's March PMI and U.S.
durable goods data, due early next week, for further clues on
demand prospects in the world's top two economies, which
together consume about half the globe's copper supplies.
    "In terms of the growth picture, the global outlook remains
patchy at best," said Ed Meir, analyst at INTL FCStone. 
    "Although things seem to be picking up in the U.S., the
recovery remains tentative given the budget and tax
uncertainties that still need to be sorted out." 
     
    HUGE SHORTS
    For now, traders remain mixed on copper's next step. Its
demand fundamentals are worsening due to swelling supply but the
dominance of short or sell position holders signals that any
rally could ignite a vicious round of short-covering.
    "I am going for up now. Price action in the past two weeks
has shown a base in metals. Soon shorts will cover, but copper
will be capped at $7,900 to $8,000," said a Singapore based
trader. "If it happens, it's going to happen fast."
    Hedge funds and money managers raised their bullish bets in
gold by 63 percent and added their net short position in copper
to a fresh four-year high in the week to March 19, Commodity
Futures Trading Commission data showed on Friday. 
    In other metals traded, soldering material tin,
untraded at the close, was bid at $23,190 from Friday's close of
$22,925 while zinc, used in galvanizing, ended at $1,944
from $1,952.
    Battery material lead closed at $2,181 from $2,198,
aluminium ended at $1,929 from $1,947 while
stainless-steel ingredient nickel was last bid at $16,975 from
$17,145. 
 Metal Prices at 1705 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2009   Ytd Pct
                                                              move
  COMEX Cu       344.75       -0.85     -0.25     334.65      3.02
  LME Alum      1931.50      -15.50     -0.80    2230.00    -13.39
  LME Cu        7639.00      -16.00     -0.21    7375.00      3.58
  LME Lead      2190.00        1.00     +0.05    2432.00     -9.95
  LME Nickel   17000.00     -145.00     -0.85   18525.00     -8.23
  LME Tin      23050.00      125.00     +0.55   16950.00     35.99
  LME Zinc      1939.00      -13.00     -0.67    2560.00    -24.26
  SHFE Alu     14725.00       25.00     +0.17   17160.00    -14.19
  SHFE Cu*     55890.00      150.00     +0.27   59900.00     -6.69
  SHFE Zin     15030.00       85.00     +0.57   21195.00    -29.09
 ** 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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