January 4, 2012 / 10:17 AM / 8 years ago

METALS-Copper drops on euro zone debt worries

* Downturn in euro zone private sector eases in Dec
    * Stronger dollar against euro adds to metal pressure
    * U.S. durable goods orders for Nov slightly ahead of
expectations

    By Harpreet Bhal and Melanie Burton	
    LONDON, Jan 4 (Reuters) - Copper prices
fell more than three percent on Wednesday,
 reversing a rally from the previous
session as concerns about the euro zone debt crisis eroded
confidence and prompted worries about the demand outlook for
industrial metals.	
    Three-month copper on the London Metal Exchange
(LME) fell 3.2 percent to close at
 $7,5 40 a tonne on Wednesday,
down from a close of $7,790 in the previous session when it hit
a three-week high. 	
    "The first day back for the new year saw a flush of
enthusiasm...the second day in and it would appear the focus
returns once more to the previous worries, primarily over some
of the debt concerns in Europe," said analyst Duncan Hobbs of
Macquarie Securities.	
    "I think this time of the year, ahead of the Chinese new
year festival, it's likely the major macro data, political news
agenda will continue to set the tone for the exchange traded
commodities," he added. 	
     Worries over the euro zone debt crisis and the
region's banks hit global stocks and boosted the dollar on
Wednesday after Italian lender UniCredit priced a rights issue
at a huge discount and a German bond auction failed to impress.
 	
    Germany sold 4.06 billion euros of government bonds, drawing
greater demand from investors than at the bond's launch in
November. France will hold a debt sale on Thursday, followed by
Spain and Italy next week. 	
    All eyes will be on a meeting between France's Nicolas
Sarkozy and German Chancellor Angela Merkel in Berlin on Jan. 9
for talks that are likely to centre on new rules to enforce
budget discipline across the European Union.	
    A stronger dollar also pressured metals because priced in
dollars, commodities become more expensive for holders of other
currencies.	
     The dollar continued to strengthen on Wednesday and climbed
to a session high against the yen and euro as persistent worries
over euro zone sovereign funding requirements kept the
safe-haven greenback in demand. 	
    Helping to support the dollar was data showing that US
factory orders slightly beat expectations in Nov, while
October's orders were revised to show a smaller fall.
 	
	
  	
    	
    STRONGER YUAN	
    Further ahead, a stronger Chinese currency is shaping up to
become a greater force on metals prices, Standard Bank said in a
note. With a stronger yuan, Chinese consumers could purchase
more dollar-priced commodities with their money.	
     "Should the Eurozone debt crisis finally evolve into a
currency crisis over the coming year, as participants start to
express their view on the economic bloc in the euro, rather than
in the bond markets, arguably the CNY:USD exchange rate may
become the main currency driver impacting on metal prices," it
said.	
    The Chinese yuan has been steadily appreciating against the
dollar since September 2010. 	
    China is the world's major consumer of copper and accounts
for some 40 percent of refined demand.  	
    "With China so close to its New Year holidays, it's still
too early to detect whether sentiment has shifted, positively or
negatively, with the market only likely to start ramping up
activity in February," said Standard Bank in a note. China's
Lunar new year holiday will run for a week from Monday Jan. 23. 	
    In other metals, three-month aluminium ended
untraded in the final rings but bid at $2,064 from Tuesday's
close of $2,076 a tonne, while battery material lead 
finished at $2,060 from $2,100 a tonne.  	
    Aluminium stocks in LME-registered warehouses rose by 4,425
tonnes to a fresh record high of 4,983,175 tonnes, data showed. 
    In news, bankrupt primary aluminium producer ZALCO is in
talks with eight potential buyers for a takeover of part or all
of its plant in Zeeland, the Netherlands, the company's receiver
said on Wednesday. 	
    Soldering metal tin finished at $19,605 from
$19,995, while zinc ended at $1,869, from $1,878. Nickel
 closed at at $18,800 a tonne, down from Tuesday's close
of $18,900. 	
    In industry news, China's large copper smelters and global
miner BHP Billiton BHP.AX BLT.L have settled 2012 term copper
concentrate treatment and refining charges at $60 a tonne and 6
U.S. cents a pound, smelter sources said. 	
 Metal Prices at 1723 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in 
 yuan/T
  Metal            Last      Change  Pct Move   End 2009   Ytd Pct
                                                              move
  COMEX Cu       343.20       -9.65     -2.73     334.65      2.55
  LME Alum      2064.00      -12.00     -0.58    2230.00     -7.44
  LME Cu        7535.00     -255.00     -3.27    7375.00      2.17
  LME Lead      2059.00      -41.00     -1.95    2432.00    -15.34
  LME Nickel   18795.00     -105.00     -0.56   18525.00      1.46
  LME Tin      19605.00     -390.00     -1.95   16950.00     15.66
  LME Zinc      1869.00       -9.00     -0.48    2560.00    -26.99
  SHFE Alu     15915.00       70.00     +0.44   17160.00     -7.26
  SHFE Cu*     55790.00      430.00     +0.78   59900.00     -6.86
  SHFE Zin     14775.00      -20.00     -0.14   21195.00    -30.29
 ** 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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