June 13, 2012 / 7:46 AM / 6 years ago

METALS-Copper edges up, but Europe fears weigh

* Fitch downgrades 18 Spanish banks
    * Rising physical premiums show Chinese demand recovering
    * Coming Up: U.S. retail sales; 1230 GMT

 (Updates prices; adds quotes, details)	
    By Carrie Ho	
    SHANGHAI, June 13 (Reuters) - Copper rose slightly on
Wednesday, but mostly stayed in narrow ranges amid thin volumes,
reflecting investor caution as a resolution to Europe's debt
crisis remained elusive, clouding the outlook for raw material
demand.	
    Spain's surging borrowing costs and uncertainty ahead of
Greek elections this weekend have trimmed appetite for riskier
assets after a rally in Asia on Monday, when London copper rose
the most in nearly two months.	
    "Copper prices are stuck in a narrow range, reflecting
caution and directionless trading. Investors are encouraged by
equities' rise, but are wary over the euro zone problems, which
have so many implications for the world economy," said Great
Wall Futures analyst Li Rong.	
    Three-month copper on the London Metal Exchange 
inched up 0.3 percent to $7,420 a tonne by 0703 GMT, with volume
traded on LME Select at just over 2,500 lots, about half of the
normal volume at this time of day.    	
    The contract jumped 1.7 percent on Monday in a short-lived
rally spurred by a European Union-led bailout package for
Spain's banks.	
    Fitch Ratings on Tuesday downgraded 18 Spanish banks less
than a week after it cut the country's sovereign debt rating,
underscoring the potential for lenders' assets to deteriorate
further. 	
    The most-active September copper contract on the Shanghai
Futures Exchange gained 0.6 percent to 54,070 yuan
($8,500) a tonne, after losing more than 1 percent in the
previous session.	
    "Technically, we are in a bear market rally, which in the
short term has little momentum to move either upwards or
downwards. Maybe we will get more trading direction after the
Greek elections," said CIFCO Futures analyst Zhou Jie.	
         	
    PREMIUMS RISE 	
    LME copper is down around 2 percent so far this year,
purging early double-digit gains spurred by expectations demand
from top consumer China will be strong. The metal fell to a near
six-month low of $7,233.25 on Friday.	
    Traders said the recent drop in copper prices has spurred
Chinese demand for the metal, with physical premiums rising by a
steep $40 to $60-$70 per tonne over LME prices since early May. 
  	
    A Qingdao-based trader said she sees signs of a small pickup
in drawdowns from bonded warehouses in Shanghai, as LME copper's
premium over Shanghai eased to 1,004 yuan from nearly 4,000 yuan
in early May. 	
    Macquarie analyst Bonnie Liu said the surprise 12 percent
rise in China's copper imports last month also offered hints
that Chinese demand was starting to recover. 	
    "It is worth noting that this big import number for May
happened at the same time as copper inventory was going down in
China for both bonded and ShFE warehouses," she said in a recent
note.	
    "This implies improving demand from downstream end-users
from the second quarter compared with the weakness at the start
of the year."	
    But market players warned the rise in real demand was still
slight, and much smaller than the import figures and a current
backwardation in ShFE copper's front-to-forward-month spreads
would suggest. <0#SCF:> 	
    	
                                                               
  Base metals prices at 0703 GMT
  Metal              Last       Change   Pct Move YTD pct chg
  LME Cu            7420.00     25.00     +0.34     -2.37
  SHFE CU FUT SEP2    54070       330     +0.61     -2.80
  LME Alum          1971.75      3.75     +0.19     -2.39
  SHFE AL FUT SEP2    15900        35     +0.22      0.38
  HG COPPER JUL2     334.65      1.10     +0.33     -2.60
  LME Zinc          1886.25      6.25     +0.33      2.24
  SHFE ZN FUT SEP2    14820        60     +0.41      0.17
  LME Nickel       17140.00    -35.00     -0.20     -8.39
  LME Lead          1900.50      5.00     +0.26     -6.61
  SHFE PB FUT         14980        40     +0.27     -2.03
  LME Tin          19628.00    -72.00     -0.37      2.23
  LME/Shanghai arb    1004
 
   Shanghai and COMEX contracts show most active months
   ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE 
 third month
                                                               
 ($1 = 6.3703 Chinese yuan)	
	
 (Editing by Manolo Serapio Jr. and Himani Sarkar)

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