* China copper bonded premiums steady at $170-$200-Shmet
* Possible U.S. government shutdown, lack of Fed clarity
* Japanese smelters propose 45 pct rise in term premiums
By Maytaal Angel and Eric Onstad
LONDON, Sept 25 Copper edged up on Wednesday as
solid demand from China helped stem three consecutive days of
falls, though uncertainty about the U.S. fiscal outlook and its
monetary policy kept gains in check.
A United States Senate vote is due later on Wednesday on a
motion that would allow the government to keep running beyond
the end of the month when budgets are due to expire, though
lawmakers have yet to find common ground.
Investors, wrong-footed by last week's shock Federal Reserve
decision not to begin trimming its bond-buying stimulus, are
cautious on riskier assets like copper.
Yet physical demand for copper in top consumer China remains
healthy, with premiums for metal in bonded zones holding in a
$170-$200 range, according to China-based price provider Shmet.
China consumes about 40 percent of the world's copper.
"Destocking in China has ended and the economy is picking
up, there's no doubt about that at all," said Nic Brown, head of
commodities research at Natixis.
"We are still in a market that's in deficit. In 2014 there's
more supply coming on stream so eventually there will be
downward pressure on copper, but before that there's every
prospect the market gets squeezed aggressively."
Benchmark three-month copper on the London Metal Exchange
failed to trade in closing open outcry activity, but was
last bid at $7,195 a tonne, up 0.66 percent.
The move broke three days of falls that eroded gains made
following last week's shock Fed decision not to taper stimulus.
Copper prices have been held back in recent weeks by U.S.
fiscal and monetary policy uncertainty, and also by long
standing worries that the market is well supplied and moving
Those worries about oversupply, however, receded on
Wednesday after Japanese copper smelters proposed a 45 percent
rise in the term premiums they want to charge Chinese end-users
next year, reflecting expectations of rising demand and tight
Also, Aurubis, Europe's biggest copper smelter,
said on Wednesday it will offer 2014 copper term premiums for
its European customers at $105 per tonne - an increase of $19
per tonne from last year.
Premiums are paid above the LME spot price to cover
physical delivery costs, but they also vary according to supply
and demand dynamics, rising when market balances are tight.
Looking into next year and beyond however, copper market
supplies are still expected to expand significantly.
BHP Billiton , the world's biggest mining
company, said on Wednesday global commodities markets were being
undermined by rising supplies of raw materials, but added that
market conditions for copper over time should be influenced more
by resource decline.
It also said it expected overcapacity in the aluminium and
nickel industries to persist.
LME aluminium closed 0.46 percent higher at $1,804 a
tonne, zinc climbed 0.53 percent to end at $1,886 a
tonne, while lead gained 0.58 percent to $2,076 a tonne.
Russia's United Company Rusal, the world's
biggest aluminium producer, asked the London Metal Exchange
(LME) to postpone a proposed overhaul of warehouse rules that it
believes threatens to further distort the aluminium market.
Tin was the best performer, jumping 1.2 percent to
end the day at $23,175 a tonne, while nickel added 0.55
percent to $13,825 a tonne.
Nickel, which has been burdened by overproduction and market
surpluses, has been the worst performing base metal on the LME,
falling nearly 20 percent so far this year.
Analyst Walter de Wet at Standard Bank said nickel was
looking weak again.
"Open interest which has been declining fast over the past
week would indicate that short covering has taken place in the
run-up to the Fed FOMC meeting last week. If most of the weak
shorts have covered already, the metal may look to test the
support at $13,700 soon," he said in a note.