METALS-Copper falls on strong dollar, euro zone worries

Wed Mar 27, 2013 1:15pm EDT

* Aluminium, lead, zinc hit four-month lows
    * Euro falls vs dollar on Cyprus bank bailout deal
    * LME volumes seen tailing off ahead of Easter holiday
    * U.S. pending home sales fall more than expected in Feb


    By Susan Thomas
    LONDON, March 27 (Reuters) - Copper fell on Wednesday due to a stronger
dollar and concerns over the euro zone, while data was mixed out of the United
States, the world's largest economy. 
    A still modest level of copper buying in top consumer China as the market
heads into the traditionally strong second quarter also held back the base
metals complex as aluminium, lead and zinc touched their lowest levels in four
months.
    Three-month copper on the London Metal Exchange closed 0.2 percent
lower at $7,608 a tonne. Although copper has risen from seven-month lows below
$7,500 hit last week, it has failed to gather much steam. 
    "Sentiment around Europe has turned slightly more negative, and the threats
of supply disruption which might have given prices a lift in the past have
really had very little effect so far," Standard Chartered analyst Dan Smith
said.
    "So it does suggest the market is in quite a bearish frame of mind."
    Shares fell and the euro hit a four-month low against the dollar, which
would make metals more expensive for holders of the European single currency, as
the implications of the Cyprus bank bailout deal weighed on sentiment.
 
    A survey showed that confidence in the euro zone's economy worsened in
March, falling after four straight months of gains. 
    Cyprus is expected to complete capital control measures on Wednesday to
prevent a run on banks by depositors after the country agreed to a bailout deal
that will wipe out some senior bank bondholders and impose losses on large
depositors.
    The worry among investors and economists is that, despite attempts by euro
zone officials to quash the idea, the plan could become a blueprint for any
future bailout in the troubled currency bloc.
    "Political events such as the bailout negotiations for Cyprus always pose a
risk that can derail the underlying fundamental trends," Credit Suisse said in a
research note. "However, the effects of these events are most likely temporary."
    After coming under significant selling pressure in February and March,
Credit Suisse said, the metals sector is well supplied, and the question is
whether the economic recovery is strong enough to tighten market balances and
push prices higher again. 
    "At current price levels we think such a scenario is likely," it said. 
     But markets were quiet and traders expected volumes to tail off ahead of
the long weekend. The London Metal Exchange is closed on Friday and Monday for
Easter, while China's markets are shut on April 4 and 5.
    
    ALUMINIUM, LEAD, ZINC HIT FOUR-MONTH LOWS
    Metals markets digested recent data, some of which showed on Tuesday that
the U.S. economy regained momentum early in the first quarter. On Wednesday,
however, the signs were less clear as contracts to buy previously owned U.S.
homes fell in February by more than expected. 
    Also weighing on markets was more bad news from Europe, where the first fall
in euro zone economic confidence in March after four months of gains came on top
of a slump in Italian manufacturing and retail sales and a confirmation that
France's economy contracted at the end of last year. 
    "I think generally across the base metals complex there is an appetite for
playing the ranges, but I think the next few weeks are going to be really
crucial for copper," Standard Chartered's Smith said. "We get the China macro
data for March in April, and that will be a really important data point."
    China's official purchasing managers index (PMI) will be released on April
1. The HSBC China PMI for March rose to 51.7 from 50.4 but remained below a
two-year high reached at the start of the year. 
    Aluminium, lead and zinc fell to around four-month lows. Traders reported
consumers were buying at lead's lows of around $2,100 a tonne, but for aluminium
momentum-based funds looked set to drive further losses, with another pocket of
consumer buying expected below $1,900 a tonne.
    Three-month aluminium did not trade at the close, but was bid at
$1,916 a tonne, up 0.2 percent, while lead traded down 0.6 percent at
$2,118 in closing business. 
    LME data showed open interest rose in aluminium and zinc by over 4,000 lots
each on Tuesday, which indicated new short positions had been added as prices
declined. 
    Zinc, which came off its lows and closed 0.2 percent firmer at
$1,908 a tonne, had strong volumes of 12,777 lots by the end of open-outcry
trading, slightly higher than copper or aluminium.
    "Zinc is being hit by technical selling. It broke a long-term support line
at $1,911 and is now pointing at $1,810," a trader said.
    Nickel ended 0.4 percent firmer at $16,850 a tonne and tin 
fell 0.6 percent to $23,000 by the close. 
    
 Metal Prices at 1707 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       344.35        0.10     +0.03     365.25     -5.72
  LME Alum      1918.25        6.25     +0.33    2073.00     -7.47
  LME Cu        7610.75      -14.25     -0.19    7931.00     -4.04
  LME Lead      2122.75       -8.25     -0.39    2330.00     -8.89
  LME Nickel   16851.00       71.00     +0.42   17060.00     -1.23
  LME Tin      22926.00     -224.00     -0.97   23400.00     -2.03
  LME Zinc      1910.75        5.75     +0.30    2080.00     -8.14
  SHFE Alu     14655.00      -50.00     -0.34   15435.00     -5.05
  SHFE Cu*     55600.00     -140.00     -0.25   57690.00     -3.62
  SHFE Zin     14835.00     -135.00     -0.90   15625.00     -5.06
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.