METALS-Copper flat; wary of euro zone recession, fiscal cliff

Thu Nov 15, 2012 10:52pm IST

* U.S. fiscal cliff concerns prompt cautious trade
    * Euro zone slips into second recession since 2009
    * China's SRB buys 100,000 T each of aluminium, zinc

 (Updates with closing prices)
    By Harpreet Bhal and Eric Onstad
    LONDON, Nov 15 (Reuters) - Copper steadied on Thursday, helped by signs that
a slide in China's economic growth may have halted, but held back by concerns
about a recession in the euro zone and the U.S. fiscal cliff of spending cuts
and tax increases. 
    Three-month copper on the London Metal Exchange closed virtually
unchanged, down 50 cents to $7,639.50 a tonne, after earlier touching an
intraday low of $7,606. 
    Trading is likely to remain cautious in the weeks ahead, while the U.S.
Congress is locked in talks to resolve a fiscal impasse. If no agreement is
reached, a $600 billion mix of tax increases and spending cuts is set to kick in
on Jan. 1, threatening to derail the U.S. economic recovery.  
    Data on Thursday sharpened those economic concerns, showing superstorm Sandy
drove new claims for U.S. jobless benefits to a 1-1/2 year high last week, a
sign the deadly storm could hold back economic growth. 
    Also weighing on industrial metals was data showing the euro zone had fallen
into a recession in July-September, the second since the global financial crisis
in 2009. French resilience could not make up for a slump across Europe, and the
three-year debt crisis slowed German growth to a crawl.    
    Copper has shed more than 9 percent since touching a peak of $8,422 in mid
September following quantitative easing measures announced by the U.S. Federal
Reserve. 
    "For the rest of the year, price moves are not likely to be fundamental
unless we see big moves in the news flow or in the dollar. Metals prices are
expected to be range-bound until the end of the year," said Robin Bhar, analyst
at Societe Generale.  
    Prices are trading up just 0.7 percent in the year to date.  
    "In order to get real traction, we may need to wait for progress on the U.S.
government's finances and from further signs from China that its economy is
turning higher," ANZ analysts said in a note.
    In China, the world's biggest consumer of copper, recent figures showed that
a slowdown in growth rates probably hit bottom in October.
    Investors have shied away from large purchases of the metal, however, due to
bulging Chinese inventories and concerns about the fiscal health of the United
States.
    Several banks have flagged bullish price prospects from current levels for
copper, indicating that prices could recover over the next six weeks due to
signs China's economy had picked up in October. 
    "Leading indicators (in China) seem to suggest that the worst may be over
and things should be improving. A lot of the negative sentiment has been priced
into the market and we are now looking for more positive news out of China,"
Bhar said. 
       
    
    CHINA BUYS ALUMINIUM  
    China's ruling Communist Party unveiled an older, conservative new
leadership line-up on Thursday that appears unlikely to take the drastic action
needed to tackle pressing issues such as social unrest, environmental
degradation and corruption. 
    "Despite events unfolding largely to script, there remains much uncertainty
as to where this new generation of leaders will take China," Mike Ingram, a
market analyst at BGC, said in a note. 
    China's State Reserves Bureau kicked off its latest buying spree on
Thursday, taking volumes of 100,000 tonnes each of aluminium and zinc from
domestic smelters, falling short of the 160,000 tonnes of aluminium and 150,000
tonnes of zinc initially planned, sources said. 
    "Although the numbers are relatively small given the size of the market, it
does suggest that the Chinese government has got its chequebook out and has
effectively put a floor under the domestic aluminium market," analyst Leon
Westgate at Standard Bank in London said in a note.
    Benchmark aluminium closed 0.3 percent lower at $1,964 while zinc
 added 0.3 percent to $1,955. 
    Tin ended the day unchanged at $20,475 a tonne, lead finished
 0.8 percent firmer at $2,199 and nickel lost 1.5 percent to $15,910.
    
 Metal Prices at 1719 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       346.50        1.15     +0.33     344.75      0.51
  LME Alum      1962.00       -8.00     -0.41    2020.00     -2.87
  LME Cu        7643.25        3.25     +0.04    7600.00      0.57
  LME Lead      2194.00       12.00     +0.55    2034.00      7.87
  LME Nickel   15945.00     -210.00     -1.30   18650.00    -14.50
  LME Tin      20425.00      -50.00     -0.24   19200.00      6.38
  LME Zinc      1951.75        1.75     +0.09    1845.00      5.79
  SHFE Alu     15440.00       65.00     +0.42   15845.00     -2.56
  SHFE Cu*     55840.00      -70.00     -0.13   55360.00      0.87
  SHFE Zin     15110.00       20.00     +0.13   14795.00      2.13
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
 
 (Additional reporting by Melanie Burton in Singapore; Editing by Anthony
Barker)
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