December 19, 2012 / 5:21 PM / 5 years ago

METALS-Copper slips on uncertain outlook for demand

6 Min Read

* Tin best performer in 2012 so far, up 22 pct
    * Lead hits highest since mid-September 2011
    * U.S. housing construction starts fall in November

    By Harpreet Bhal and Stephen Eisenhammer
    LONDON, Dec 19 (Reuters) - Copper slipped on Wednesday due to uncertainty
over the outlook for demand, increased by a fall in the number of U.S. house
building projects being started in November, while investors also kept a close
watch on budget talks in the United States.
    Analysts said physical demand remained sluggish for the metal used in power
and construction, keeping prices in a tight range.
    "As we approach the end of the year, there is some book-squaring activity
going on, and people have been taking profits, so copper has drifted lower,"
Andrey Kryuchenkov, an analyst at VTB, said. 
    "There is a good chance that we could see a last-minute deal in the U.S. to
avert a fiscal cliff. Provided that goes ahead, it would be good for the base
metals market. However, for the gains to be sustained for the likes of copper,
we need to see more evidence of improvement in spot demand." 
    Three-month copper on the London Metal Exchange (LME) traded at
$7,926 a tonne at the close, down 1.2 percent from Tuesday's closing bid of
$8,024 a tonne. 
    Traders said U.S. housing data added to doubts about copper demand
prospects. The number of construction starts on houses fell 3 percent in
November compared with the previous month, below economists' expectations, data
from the Commerce Department showed.   
    Copper fell to a session low of $7,912 per tonne following the announcement.
    Republicans tried to squeeze more concessions from the White House on taxes
in manoeuvring for a deal to prevent the U.S. economy from going over the
so-called "fiscal cliff" of tax hikes and spending cuts in the new
    Since a price rally of almost 8 percent from mid-November to a near
two-month high on Dec. 12, momentum has begun to fade, with traders cutting risk
and squaring positions ahead of year-end. The metal is up more than 5 percent
for the year. 
    "With market participants closing their books ahead of year-end, we wouldn't
really expect too big a change, especially in the industrial metals space, where
it seems there is a consolidation going on from the recent shift higher," Stefan
Graber, an analyst at Credit Suisse, said.    
    Also underpinning prices was a rise in the euro to a 7-1/2-month high
against the dollar after data showed German business sentiment climbed for a
second month running in December as confidence in the outlook surged more than
at any time in the last 2-1/2 years. 
    A weak dollar makes commodities priced in the U.S. unit cheaper for holders
of other currencies. 
    In industry news, some banks have tightened credit for imports of refined
copper by China, the world's largest consumer of the metal, as stocks pile up in
bonded warehouses and prices hover below London rates, reducing buying of the
metal and keeping premiums low. 
    In other metals, three-month tin hit its highest since mid-March at
$23,847. It fell back to finish at $23,500, down slightly on Tuesday's close of
$23,525 a tonne.
    Tin has been the top performer of the base metals this year, up 22 percent,
and has been streaking ahead of the second-best performer, lead, which has
gained almost 14 percent. 
    Tin prices have hit successive eight-month highs for six of the last eight
sessions, boosted by longer term technical buying and short-covering, RBC
Capital said in a note. 
    "While the longer-term prospects for tin continue to look positive in terms
of price, the short-term risk would appear to have more downside than upside
potential, given the recent run," RBC said. 
    Lead hit its highest since mid-September 2011 at $2,347.75 a tonne,
before closing at 2,337, up 0.8 percent on Tuesday's close.
    Zinc closed at $2,086, almost flat on Tuesday's close of $2,090,
while aluminium fell to $2,085 from $2,098 the previous day. Nickel
 closed at $17,750, down from Tuesday's close of $17,800.
 Metal Prices at 1700 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
  COMEX Cu       359.75       -4.45     -1.22     344.75      4.35
  LME Alum      2085.50      -12.50     -0.60    2020.00      3.24
  LME Cu        7913.75     -146.25     -1.81    7600.00      4.13
  LME Lead      2337.50       18.50     +0.80    2034.00     14.92
  LME Nickel   17741.00      -59.00     -0.33   18650.00     -4.87
  LME Tin      23440.00      -85.00     -0.36   19200.00     22.08
  LME Zinc      2084.00       -6.00     -0.29    1845.00     12.95
  SHFE Alu     15290.00      -10.00     -0.07   15845.00     -3.50
  SHFE Cu*     57650.00     -230.00     -0.40   55360.00      4.14
  SHFE Zin     15460.00      -85.00     -0.55   14795.00      4.49
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07

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