METALS-Copper slips on higher mine output, subdued China demand

Wed Jan 23, 2013 10:53pm IST

* BHP sees Escondida copper output up 20 pct in 2013
    * Freeport expects 18 pct rise in copper sales this year
    * Zinc, lead outperform after breaking through resistance

 (Updates with closing)
    By Eric Onstad and Harpreet Bhal
    LONDON, Jan 23 (Reuters) - Copper fell on Wednesday, dragged lower by
indications of a well-supplied market amid higher output from mining groups such
as BHP Billiton and signs of subdued demand from top consumer China. 
    Three-month copper on the London Metal Exchange ended at $8,103 a
tonne, down from Tuesday's close of $8,133 a tonne, and slipping back from a
2-1/2 week high of $8,154.25 hit in intraday trade.
    BHP, the world's biggest mining group, released its quarterly report
on Wednesday showing 5 percent higher copper output and forecast the world's
biggest copper mine would step up production by a fifth this year.
    "Copper does seem to be struggling for any meaningful direction at the
moment. Overhanging copper is this sense that supply generally is improving,"
said analyst David Wilson at Citigroup in London. 
    "We're just now getting all the big miners' production results for Q4 and I
suspect we'll see some pretty healthy gains across the board."
    On Tuesday, Freeport-McMoRan said it expected to increase
consolidated copper sales this year by 18 percent to 4.3 billion pounds.
Freeport runs Grasberg, the world's second-biggest copper mine. 
    "We anticipate a possible small surplus (in copper), but with stocks in firm
hands, prices should be well supported at $7,850. Resistance at $8,350," Sucden
said in a note. 
    Copper hit its highest level in more than two months at $8,256.50 earlier in
January following a deal by U.S lawmakers to avoid a "fiscal cliff" of spending
cuts and tax increases.  
    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.  
       
    
    CHINA DATA 
    Also weighing on the price was recent data from China that showed high
domestic copper production and analysts estimate more than 1 million tonnes of
copper are sitting in bonded warehouses in the world's biggest copper consumer.
    Chinese demand has been muted in recent weeks, with traders and analysts
expecting buying to remain subdued until after the country's week-long Lunar New
Year holiday in mid February.
    Attention is also on the scale of a revival in Chinese economic growth, with
traders hoping HSBC's China flash purchasing manufacturer's index, due for
release on Thursday, will provide fresh momentum. 
     "It's possible in the very near term the China macro backdrop could
continue to show further signs of stabilisation and that it could fuel positive
sentiment," said Thomas Lam, chief economist at DMG & Partners Securities in
Hong Kong.
    In other metals, benchmark zinc touched its highest levels in nearly
three weeks at $2,095 after breaking above major resistance on Tuesday, traders
said.
    It was untraded at the close, and was last bid at $2,084.50 a tonne, up from
Tuesday's close of $2,053 a tonne. 
    Lead also touched a near-three-week high at $2,389 a tonne. It ended
at $2,370 a tonne, up from Tuesday's close of $2,325.
    Aluminium closed at $2,077 a tonne, up from $2,075, after benchmark
U.S. Midwest spot premiums reached a record high. A steep contango in the
forward curve continued to attract and lock metal into warehouses, cutting
availability on the spot market. 
    Soldering material tin closed at $24,450 from Tuesday's close of
$24,625, while nickel ended at $17,545 from $17,385.
    
 Metal Prices at 1709 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2012   Ytd Pct
                                                              move
  COMEX Cu       368.95       -0.75     -0.20     365.25      1.01
  LME Alum      2076.25        1.25     +0.06    2073.00      0.16
  LME Cu        8102.25      -30.75     -0.38    7931.00      2.16
  LME Lead      2365.00       40.00     +1.72    2330.00      1.50
  LME Nickel   17490.00      105.00     +0.60   17060.00      2.52
  LME Tin      24475.00     -150.00     -0.61   23400.00      4.59
  LME Zinc      2078.25       25.25     +1.23    2080.00     -0.08
  SHFE Alu     15255.00      -10.00     -0.07   15435.00     -1.17
  SHFE Cu*     58590.00     -100.00     -0.17   57690.00      1.56
  SHFE Zin     15545.00       60.00     +0.39   15625.00     -0.51
 
 (Additional reporting by Melanie Burton in Singapore; Editing by Alison
Birrane)
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