METALS-Copper rises on short-term supply squeeze, dollar caps gains

Fri Dec 6, 2013 12:29pm EST

* Nearby supply tightness underpins copper

* Markets nervous overall about risk of Fed tightening

* U.S. employers add 203,000 jobs in Nov, exceeding expectations

By Maytaal Angel

LONDON, Dec 6 (Reuters) - Copper rose on Friday, underpinned by tightening near-term supply but gains were capped by a firmer dollar after stronger-than-expected U.S. jobs data.

Reports showed that U.S. employers added 203,000 new jobs in November and the jobless rate fell to a five-year low, raising chances the Federal Reserve may start cutting bond buying sooner than expected, which sent the dollar higher.

A stronger U.S. currency makes it more expensive for foreign investors to buy dollar-priced commodities, typically having a negative effect on prices.

The stimulus programme has also released more money into the economy, and has been used to buy assets including commodities. A withdrawal would pressure those prices lower.

But putting a floor under copper prices, stocks on the London Metal Exchange have continued to fall, and are down to their lowest since mid-February .

Three-month copper on the London Metal Exchange closed at $7,122 from a last bid of $7,068 on Thursday. It is still set to post losses of more than 10 percent this year.

"The market is concerned that (the Fed) might taper in December. On the other hand if you look at copper inventories (they) already provide indications that the market has been oversold," said Quantitative Commodity Research consultant Peter Fertig.

But he added: "I expect we remain range trading (in the first quarter). Even if the Fed is going to taper then it is because the economy is sufficiently strong. And China growth is accelerating but only slightly."

Copper has slipped in the past month towards the lower end of a range in place since early August of $6,900-$7,420 a tonne, as demand winds down into year-end and on prospects for a surplus next year.

The global market for refined copper swung into a 21,000 tonne surplus in August, rising after three straight months of a shortfall mostly due to higher production, the International Copper Study group said last month.

Offering nearer term support for copper, however, China is expected to post an increase in imports of major commodities in November compared with the preceding month, helped by stock building ahead of winter and after a week-long holiday disrupted shipments in October.

China is the world's top copper consumer, accounting for some 40 percent of global copper demand.

Deutsche Bank AG pulled the plug on its global commodities trading business, cutting 200 jobs as it becomes the first major bank to exit the once lucrative sector due to toughening regulations and diminished profits.

Benchmark LME nickel hit the highest in nearly a month on Thursday at $13,918 a tonne. It closed at $13,760 from $13,750 at the close on Thursday, supported by news that a ban on nickel ore exports from Indonesia will be upheld.

A domestic Indonesian miners' association said the mining industry will be killed off by a planned ban on unprocessed mineral exports, accusing the government of favouring international firms that can more easily adapt to the new rules.

Benchmark LME aluminium closed at $1,779 a tonne from $1,758 at the close on Thursday, zinc at $1,905 from $1,897 and tin at $23,150 from $22,975. Lead , untraded at the close, was bid at $2,093 per tonne from $2,085.

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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