REFILE-METALS-Copper falls as strong U.S. data fan fears of Fed tapering

Mon Dec 2, 2013 12:42pm EST

* U.S. Nov factory activity hits 2-1/2 year high

* Dollar rises, euro zone manufacturing remains weak overall

* Chinese manufacturing maintains steady growth

By Maytaal Angel and Eric Onstad

LONDON, Dec 2 (Reuters) - Copper extended last month's losses on Monday as upbeat U.S. economic data spurred renewed fears about the Federal Reserve trimming monetary stimulus and the dollar strengthened.

Three-month copper on the London Metal Exchange closed down 1.1 percent at $6,975 a tonne after gaining half a percent in the previous session.

"It's the dollar, which is firmer now, and probably renewed caution about when the Fed is going to taper," Frankfurt-based Commerzbank analyst Daniel Briesemann said.

Data showed U.S. factory activity at its highest for two and a half years in November and construction spending increased solidly in October, brightening the economic outlook.

A stronger U.S. economy makes it more likely the Federal Reserve will start paring its commodity-friendly stimulus sooner rather than later, restricting access to funds for business and commodity investors.

The dollar index rose about 0.2 percent, making dollar-priced metals more expensive for non-U.S. investors.

A weekly report by the U.S. Commodity Futures Trading Commission on positioning in Comex copper is due later on Monday, delayed from Friday because of the Thanksgiving holiday.

"There has been a massive build up in short positions in the past few weeks and I wouldn't be surprised to see this trend continue, and that's continuing to weigh on prices," Briesemann said.

"But this could also prove to be a springboard for prices when the mood of market players changes and they have to cover their short positions."

Copper failed to gain support from data showing China's factory activity maintained steady growth momentum in November.

"The China data was expected, copper remains range-bound. No one wants to do anything. We know there's going to be a surplus even if it's debatable how big," VTB Capital analyst Andrey Kryuchenkov said.

Copper recorded its biggest monthly loss since June last month, dogged by expectations that growing mine production would widen a market surplus into next year. But in the near term, a shortfall in refined metal and steady demand from China have put a floor under prices.

Daily LME data showed copper stocks fell by 3,425 tonnes to 420,400 tonnes, their lowest point since mid-February. Stocks have been falling consistently since June.

ALUMINIUM APATHY

Among other metals, consumer interest in aluminium has failed to pick up despite prices at four-year lows, broker Triland Metals said in a note.

"General sentiment among this group seems to be that ... they will pick up metal at lower prices in coming weeks."

Aluminium failed to trade in closing open outcry activity, but was last bid down 0.74 percent at $1,742 a tonne after touching a low of $1,736.25, the weakest since July 2009.

Nickel, the biggest loser of the base metals complex in November and down more than 20 percent this year, could be set for a rebound, given a looming Indonesian ban on raw materials exports, Barclays Capital said.

"The potential Indonesian ore export ban, which is slated to come into force in just six weeks, is a significant supply risk that should be lending some support to prices," it said.

Nickel closed barely changed, down 0.04 percent at $13,515 a tonne.

Zinc finished down 0.1 percent at $1,875 a tonne, lead fell 0.63 percent to $2,067 a tonne and tin slipped 1.3 percent to close at $22,500 a tonne.

Indonesia's tin exports picked up in November to around two thirds of typical levels, Reuters analysis of exchange data showed, recovering from a two-month slump triggered by a change in the country's export rules.

PRICES

Three month LME copper CMCU3

Most active ShFE copper SCFcv1

Three month LME aluminium CMAL3

Most active ShFE aluminium SAFcv1

Three month LME zinc CMZN3

Most active ShFE zinc SZNcv1

Three month LME lead CMPB3

Most active ShFE lead SPBcv1

Three month LME nickel CMNI3

Three month LME tin CMSN3

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