September 18, 2012 / 10:51 AM / in 5 years

METALS-Copper steadies as Fed-driven rally fades, economy eyed

* Copper pauses as focus shifts to economy, euro zone
    * China on track for weakest full-year growth since 1999-poll
    * Japan 4Q aluminum premiums set at record $254-$255
    * Coming up: U.S. August housing starts on Wednesday

    By Chris Kelly and Susan Thomas
    NEW YORK/LONDON, Sept 18 (Reuters) - Copper prices were little changed on
Tuesday, edging higher in London and lower in New York after rallying last week
to the highest levels since May on economic stimulus measures from the U.S.
Federal Reserve and the European Central Bank.
    The rally has lost steam this week as investors digested the latest central
bank stimulus plans, and shifted attention back the global economy and the
outlook for physical metals demand.
    Investors remained particularly concerned about the euro zone, especially
debt-laden Spain. These worries triggered some profit-taking in commodities and
other assets perceived as risky.
    "The easing news is now behind us and people are refocusing on Europe and
the macro picture, which don't look great. So we could see some of the gains (in
metals prices) rolled back," said Edward Meir, analyst at INTL FCStone.
    COMEX copper for December delivery shed 0.50 cent to settle at
$3,7870 per lb, backing further away from last Friday's 4-1/2-month peak at
    On the London Metal Exchange (LME), three-month copper edged up $17
to end at $8,319 a tonne.
    On Friday, it also rose to a 4-1/2-month peak at $8,411.
    Aside from the growth concerns in the United States and in Europe, investors
also fear that sluggish demand from China, the world's top copper consumer, will
remain in place for an extended period as the economy slows. 
    China, which accounts for 40 percent of global refined demand for copper, is
on course for its weakest full year of growth since 1999, with 2012 growth
likely to fall below 8 percent, a Reuters poll showed. 
    The poll showed pessimism deepening, partly reflecting disappointment at the
lack of more urgent policy action to bring down the cost of credit.
    But any further monetary easing is unlikely to come before a once-a-decade
change in the leadership of China's Communist Party, which may happen next
    Deutsche Bank analyst Daniel Brebner said for copper to break out of the
ranges it has mostly traded in the past few months, the Chinese government would
have to follow the lead of the Fed and be more aggressive in stimulating growth.
    "If that were to happen we would see a decent move higher," he said, but
added that it was unlikely before the new government was in place, and possibly
not until after the Chinese New Year early next year. 
    Also weighing on prices was a drop in the euro to session lows against the
dollar. A strong dollar makes commodities priced in the U.S. unit more expensive
for holders of other currencies.
    In aluminum, fourth-quarter premiums to Japanese buyers, Asia's biggest
importers of the metal, rose 24 percent from the previous quarter to a record
high of $254-$255 a tonne as supplies remain tight, traders said on Tuesday.
    LME three-month aluminum ended down $7 at $2,160 a tonne.
    The LME price has fallen more than 10 percent since March, but premiums -
money paid over the benchmark LME cash price to secure physical metal - have set
record highs despite a global surplus due partly to large stocks locked up by
banks in financing deals. 
    Also reflecting a lack of available supply, the cost to roll nearby aluminum
contracts soared to $15 on a tomorrow, next day delivery, basis, the
highest since January, ahead of the September contract expiry this week.
    "Expect this week to see more consolidation in an effort to wear off the
overbought situation, as well as to test the resolve of the weak longs," RBC
said in a research note.

 Metal Prices at 1805 GMT
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
  COMEX Cu       378.45       -0.75     -0.20     343.60     10.14
  LME Alum      2159.00       -8.00     -0.37    2020.00      6.88
  LME Cu        8318.00       16.00     +0.19    7600.00      9.45
  LME Lead      2274.00        9.00     +0.40    2035.00     11.74
  LME Nickel   17810.00     -410.00     -2.25   18710.00     -4.81
  LME Tin      21595.00       20.00     +0.09   19200.00     12.47
  LME Zinc      2107.50       18.50     +0.89    1845.00     14.23
  SHFE Alu     15765.00      -70.00     -0.44   15845.00     -0.50
  SHFE Cu*     59590.00     -180.00     -0.30   55360.00      7.64
  SHFE Zin     15620.00      -95.00     -0.60   14795.00      5.58
 ** 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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