METALS-Copper slips on worries over Fed stimulus, rise in output

Thu Aug 15, 2013 12:28pm EDT

* Upbeat U.S. data boost chances of paring stimulus

* Copper mine supply growth double 10-year average

* Escondida mine workers call off strike

By Susan Thomas and Eric Onstad

LONDON, Aug 15 (Reuters) - Copper dipped on Thursday on reports of increased production and uncertainty about when the United States will start trimming its economic stimulus, though growing confidence about a global economic recovery underpinned prices.

Signs that the pace of growth in top metal consumer China is steadying after contracting for more than two years has driven a rally in copper prices this month, also helped by a U.S. recovery and signs of economic revival in Europe.

Three-month copper on the London Metal Exchange, closed down 0.1 percent at $7,310 a tonne, recovering from a session low of $7,224.75.

The dollar helped copper to pare losses, swinging to a weaker stance after earlier touching a two-week high against the euro. A weaker dollar makes commodities priced in dollars cheaper for buyers in euros.

Copper rose modestly on Wednesday after hitting a nine-week high of $7,354.75 a tonne on Tuesday and has recouped about half of the year's losses of more than 16 percent seen in late June.

"Sentiment has turned, and it's not just China. Europe seems to be a bit better," BNP Paribas analyst Stephen Briggs said.

"Copper is swimming either side of $7,300, and I don't think today's fall is meaningful. Clearly the pace of the rally of late last week was always going to slacken off. I'm not sure the world has changed that much."

He pointed to short-term physical tightness of copper in many regions but a growing surplus down the line.

Analysts in a Reuters poll forecast the copper market would register a surplus of 153,000 tonnes in 2013, up from 98,500 predicted in the previous poll, and that the number would widen to 368,500 in 2014.

Miner and trader Glencore-Xstrata reported its copper production had increased by a fifth in the first six months of this year, driven by the ramp-up of mines replacing depleted operations and a stronger performance in Congo.

"The latest copper company production reports show mine supply growth remains on track to achieve 4 percent growth this year, double the 10-year average growth rate of 2 percent," analyst Ryan Belshaw at Macquarie said in a note.

UPBEAT U.S. DATA

In Chile, fears about labour disruption at the world's largest copper mine, Escondida, were temporarily averted when workers halted a strike on Thursday, but they left the door open for further action.

The improving U.S. economy has also fuelled expectations that the Federal Reserve might trim stimulus sooner rather than later, which could weigh on metals demand.

Data on Thursday showed that claims for U.S. jobless benefits fell to a near-six-year low and consumer prices rose broadly, which could draw the Fed closer to trimming its massive bond buying program.

In other metals, nickel was one of the weakest among the industrial metals complex, sliding 1.1 percent to close at$14,725 a tonne.

Nickel, mainly used in stainless steel, is burdened by a global surplus, but metals strategist Stephen Briggs at BNP Paribas said it may have marked a medium-term bottom when it touched a four-year low of $13,205 a tonne on July 9.

"But after a 12 percent rally since, the upside is limited," he said in a note, advising clients to launch a short nickel/long tin trade.

"Tin's premium over nickel has surged in recent weeks, but we think it could move above $8,000/T in 2014."

The current premium of tin over nickel is $6,865.

Tin ended down 1.5 percent at $21,590 a tonne and lead declined 0.2 percent to $2,205.

Aluminium and zinc bucked the weaker trend. Aluminium rose 0.8 percent to finish at $1,907 a tonne and zinc gained 0.3 percent to $1,960.