METALS-Copper drops to two-week lows on Fed tapering caution

Thu Jan 9, 2014 12:21pm EST

Related Topics

* US private employers hired at fastest pace in 13 months

* US non-farm jobs data eyed this week for clues on economy

* Aluminium, lead fall to lowest level in one month

By Harpreet Bhal

LONDON, Jan 9 (Reuters) - Copper prices fell to two-week lows on Thursday after upbeat jobs data increased expectations that the U.S. Federal Reserve could scale back its economy stimulus programme more aggressively than anticipated.

The Fed's massive bond-buying programme has been a major driver for global risk assets such as metals in the past few years.

Three-month copper on the London Metal Exchange, untraded at the close, was last bid at $7,213 a tonne from Wednesday's close of $7,344. It earlier fell to its lowest level since Dec. 19 at $7,209 a tonne.

A report from a major payrolls processor on Wednesday showed U.S. private employers had hired staff at the fastest pace in 13 months in December, boosting expectations that Friday's U.S. non-farm jobs figures could also top forecasts later this week.

"If the U.S. non-farm payrolls data does beat expectations, then there is a strong possibility that the new regime in the Federal Reserve bank could take more aggressive steps towards tapering, which could put more pressure on copper," said Naeem Aslam, chief market analyst at Ava Trade.

The U.S. central bank surprised many investors by deciding at a meeting in December to cut purchases by $10 billion, bringing them to $75 billion per month. It cited a stronger job market in its landmark decision.

Adding to the weak copper market were signs of limited restocking demand from China as its economy cools. China is the world's largest consumer of copper, accounting for as much as 40 percent of global refined demand.

"The dollar will continue to strengthen because of U.S tapering, and China's economic growth is slowing down," said Helen Lau, a senior commodities analyst with UOB Kay Hian in Hong Kong.

"I'm a bear on copper prices. I think $7,000 is a more sustainable level," she said.

The dollar traded close to seven-week highs against a basket of major currencies following the U.S. private-sector jobs report. A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.

In other metals, tin fell ahead of Indonesia's ban on unprocessed mineral ore exports from Jan. 12. It closed at $21,550 a tonne from a close of $21,995 on Wednesday.

"Tin is turning out to be the biggest loser - no doubt partly because of the ongoing uncertainty over the ore export ban in Indonesia," Commerzbank analysts said in a note.

Indonesia's mining ministry sought to ease a controversial mineral export ban before its Sunday deadline but still looked set to prohibit more than $2 billion worth of annual nickel ore and bauxite shipments.

Under the proposed regulations, miners such as U.S. giants Freeport-McMoRan Copper & Gold and Newmont Mining Corp would still be allowed to export copper, manganese, lead, zinc and iron ore concentrate until 2017.

Lead fell to a close of $2,100 from $2,139 at the close on Wednesday. It earlier hit its lowest level since early December at $2,100 a tonne.

Aluminium closed at $1,749 a tonne from $1,777, having earlier hit its lowest since early December at $1,751.25. Nickel closed at $13,350, down from $13,500 on Wednesday, and zinc at $2,010 from $2,029.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin

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