* Battle in aluminium sparks stock deliveries
* Tin rises to highest in 8-1/2 months
* ETF seen easing worries over stockpiles in China
By Eric Onstad
LONDON, Dec 18 Copper edged down on Tuesday as investors locked
in some profits from recent gains after progress in negotiations to avert the
U.S. fiscal cliff that could send the world's biggest economy into recession.
The prospect of a deal to head off automatic spending cuts and tax hikes may
already be partly priced into the copper market, which has gained about 6
percent since mid-November, compared with falls of about 1 percent in spot gold
and 2.5 percent in Brent crude oil.
Many markets rallied as news emerged on Monday night that differences over
resolving the fiscal cliff narrowed significantly as President Barack Obama made
a counter-offer to Republicans that included a major change in position on tax
hikes for the wealthy.
But three-month copper on the London Metal Exchange slipped 0.3
percent to $8,040 per tonne in official trading, giving up gains earlier in the
session. Copper closed nearly flat on Monday.
The most-traded March copper contract on the Shanghai Futures Exchange
slipped 0.43 percent to close at 57,880 yuan ($9,300) a tonne.
"The equities reacted favourably last night to this in New York and
logically one would assume that this would be a positive for commodities as
well," said Stephen Briggs, metals strategist at BNP Paribas in London.
"But because base metals have been faring pretty well in the last few weeks,
there may be less mileage for them, than there might be for some other sectors."
Copper has also been boosted in recent weeks on signs of a revival in
economic growth in top consumer China, which accounted for 40 percent of refined
demand last year.
Further support was expected following the approval on Monday by U.S.
regulators of JPMorgan Chase & Co's controversial plan to launch a
copper exchange-traded fund backed by actual metal stockpiles.
Stocks for the ETF will be held in non LME-registered warehouses, where
costs are cheaper, with Shanghai one of the suggested locations.
"You'd at least start to think that some of the worries about Chinese
stockpiles are going to be reduced," said senior strategist Nick Trevethan of
Copper stocks in China's bonded warehouses hit a record high of more than 1
million tonnes in November, and inventories are expected to rise by around
100,000 tonnes by the end of the year due to weak domestic demand, traders said.
A battle in aluminium on the LME between a major long holder and shorts
sparked hefty deliveries of stocks into warehouses, which erased heavy premiums
for cash material seen in recent days.
Cash spiked to a premium of up to $47 a tonne over the benchmark three month
contract on Monday, the strongest since Feb. 2007, but flipped to a
discount of $10 on Tuesday.
Analysts said the move back into its usual contango structure where cash
prices are lower than longer dated ones after short holders delivered aluminium
into LME warehouses. LME aluminium stocks have jumped by 64,325
tonnes over the past two days.
"There are millions of tonnes of unreported inventory of aluminium that have
built up in the last five years so there's plenty of scope for more material to
hit the market," Briggs said.
The increase in LME stocks appeared to weigh on three-month aluminium
, which fell 0.3 percent to $2,099 per tonne in official trading.
Other metals fared better.
Tin, which many analysts expect to be the only base metal with a
deficit next year, gained 0.5 percent to $23,425 per tonne in official rings
after touching a intraday peak of $23,500, the highest in 8-1/2 months.
Zinc rose to a 2-1/2 month high of $2,107 a tonne before giving up
the gains. It did not trade in official rings, but was bid at $2,089, down $1.
Lead added 0.4 percent to $2,310 a tonne in official trading and
nickel climbed 0.7 percent to $17,725.