January 15, 2013 / 10:31 AM / 5 years ago

METALS-Copper hits 2-week low amid U.S. debt, China demand fears

* Chinese buying to remain subdued ahead of Lunar New Year
    * Fitch says U.S. could lose triple-A rating on debt
    * Rio Tinto sees aluminium production drop 10 pct for 2012

    By Harpreet Bhal and Maytaal Angel
    LONDON, Jan 15 (Reuters) - Copper prices hit two week lows
on Tuesday as investors grew concerned about a looming battle in
Washington over the government's borrowing limit, and about the
cloudy outlook for demand from top consumer China.
    U.S. President Barack Obama presented a tough negotiating
stance about the debt ceiling late Monday. Given time to digest
the news, investors grew concerned despite comments from the
Federal Reserve that seemed to indicate the bank will stay the
course on its monetary easing programme.
    Also a concern for metals markets is the outlook for demand
from China, which consumes about 40 percent of the world's
copper, and where import buying is expected to wind down ahead
of the Lunar new Year holiday in February.
    "The Chinese have been pretty absent from the market and I
think that is sending a signal that they're not participating at
these levels and they don't need to either because stock levels
are comfortable in China for most of the base metals," said
Gayle Berry, analyst at Barclays. 
    "They're probably going to stay absent from the market until
the Chinese New Year and we are not likely to see any big buying
sprees ahead of that. That ultimately is what is being a drag on
    Three-month copper on the London Metal Exchange 
ended down 0.08 percent at $7,994 a tonne, having earlier fallen
to a two week intraday low at $7,940. Benchmark aluminium
, zinc lead and nickel also
dropped to multi-week lows.
    Copper, used in power and construction hit its highest level
in more than two months earlier in January following a deal by
U.S lawmakers to avoid a "fiscal cliff" of spending cuts and tax
    But prices have since retreated on fears the U.S. Federal
Reserve may rein in easing measures sooner than expected and
caution ahead of upcoming U.S. debt ceiling negotiations.  
    Credit ratings firm Fitch said earlier the United States
faces a "material risk" of losing its triple-A status if there
was a repeat of the wrangling over raising the country's
self-imposed debt ceiling.        
    "The base metals complex remains under pressure this
morning, with comments on the U.S. debt ceiling by US Treasury
Secretary Timothy Geithner and Barack Obama weighing on
sentiment," said Standard Bank in a note.
    Also weighing on copper, the dollar rose versus the euro,
making dollar-priced metals costlier for non-U.S. investors,
while U.S. stocks opened lower amid expectations of a lacklustre
earnings season.
    Looking ahead, investors are eagerly awaiting China's
economic growth figure due later this week, which is expected to
have quickened to 7.8 percent in the fourth quarter, according
to a Reuters poll. 
    "We think commodity prices are likely to rise further in the
coming days. This week's release of Chinese GDP and industrial
production data are key event risks due on Friday," said Credit
Suisse in a note. 
    In industry news, global miner Rio Tinto, one of the
world's top three aluminium makers, said it produced 10 percent
less primary aluminium in 2012 versus 2011 due to a labour
    Its bauxite and alumina production, both raw materials for
aluminium, however, grew 11 percent and 12 percent respectively
    Three-month aluminium closed flat at $2,052 a tonne,
having earlier fallen to a 1-1/2 month low at $2,033 a tonne. 
    Zinc, used in galvanizing, also hit a 1-1/2 month
low at $1,981.25 a tonne. It ended down 0.10 percent at $1,994 a
tonne from a last bid of $1,996 on Monday. 
    Battery material lead fell to a one-month intraday
low at $2,262.75 a tonne. It later closed down 0.13 percent at
$2,292 a tonne. 
    Soldering metal tin closed up 0.40 percent at 
$24,850 a tonne, while stainless steel ingredient nickel 
closed up 1.42 percent to $17,500 a tonne, having earlier hit a
two week low of $17,150 a tonne.
 Metal Prices at 1716 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in
  Metal            Last      Change  Pct Move   End 2012   Ytd Pct
  COMEX Cu       363.20        0.60     +0.17     365.25     -0.56
  LME Alum      2053.00        1.00     +0.05    2073.00     -0.96
  LME Cu        8001.50        1.50     +0.02    7931.00      0.89
  LME Lead      2293.50       -1.50     -0.07    2330.00     -1.57
  LME Nickel   17511.00      256.00     +1.48   17060.00      2.64
  LME Tin      24900.00      150.00     +0.61   23400.00      6.41
  LME Zinc      1995.25      -19.75     -0.98    2080.00     -4.07
  SHFE Alu     15205.00     -120.00     -0.78   15435.00     -1.49
  SHFE Cu*     57700.00     -820.00     -1.40   57690.00      0.02
  SHFE Zin     15175.00     -280.00     -1.81   15625.00     -2.88
 ** 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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