METALS-Copper falls, aluminium up as market awaits Chinese

Fri Feb 15, 2013 11:00pm IST

* Aluminium, zinc lifted by speculators despite poor fundamentals
    * Chinese buying expected upon return next week after holiday
    * Weak euro weighs on metals complex as G20 meets in Moscow

 (Updates with closing prices)
    By Eric Onstad
    LONDON, Feb 15 (Reuters) - Copper dipped on Friday as the dollar rose,
outperformed again by aluminium and zinc, but investors hoped a surge of copper
buying will emerge when Chinese participants return from holiday next week.
    Over the past month, aluminium and zinc have outperformed copper even though
both metals have some of the worst supply demand fundamentals, with large market
surpluses forecast this year.
    Speculators who track momentum and short-term trends such as CTAs (Commodity
Trading Advisers) have largely driven the gains, said Stephen Briggs, a metals
strategist at BNP Paribas in London.
    "Aluminium wasn't doing much during most of this rally, and probably people
thought it was time for a catch-up," he said.
    "In zinc, it's hard yet to get enthusiastic about the fundamentals, so that
rally looks a little overdone."
    This year, aluminium is expected to have a market surplus of 687,455 tonnes
and zinc of 180,000 tonnes, according to median forecasts of analysts polled by
Reuters last month.     
    On Friday, three-month copper closed at $8,207 per tonne from a last
bid of $8,237 on Thursday. Zinc closed at $2,175 from $2,189 and
aluminium, untraded at the close, was bid at $2,160 a tonne from $2,158.
    Benchmark zinc on the London Metal Exchange (LME) touched a 17-month peak on
Wednesday and has gained 10 percent since mid-January, while aluminium has added
nearly 6 percent, versus about 3 percent for copper. Copper hit the highest
levels in four months on Feb. 4 but has since drifted lower.
    Currencies also weighed on metals as the euro fell against the
dollar. A weaker euro makes metals priced in dollars more expensive for
customers in Europe. 
    The foreign exchange markets were volatile as G20 officials struggled to
find a common form of words on currency manipulation ahead of a summit in Moscow
later on Friday, at which divisions within the group over growth versus
austerity looked set to flare back into life. 
    In the United States, manufacturing got off to a weak start this year as
motor vehicle production tumbled, but a rebound in factory activity in New York
state this month suggested the decline would be temporary. Consumers were also a
bit more optimistic early this month.  
    
    RETURN OF CHINA
    Many investors are encouraged by recent strong economic data from the United
States and China and expect a bout of buying next week as Chinese markets open
following a week-long holiday for the Lunar New Year.
   "Right now, demand for copper is only coming from China and the U.S. because
Europe is a mess," said Henry Liu, head of commodity research at Mirae Asset
Securities in Hong Kong.
   "The stock market is quite bullish and people are excited about a Chinese
rebound. Given a liquidity improvement ... real demand for copper will pick up,"
he said.
    While a revival in copper demand is taking root in China, the effect on the
copper market will be dampened by sky-high domestic inventories, Liu added.
   China's copper stockpiles at the year-end reached record levels above 1
million tonnes.
    The return of China may be negative for zinc, Triland Metals said in a note.
    "Next week could see selling pressure emerge again when China comes back to
work; there are reportedly large stocks of metal there, and these higher prices
may see some of that stock being hedged."
    Triland was also wary on whether aluminium will maintain its bullish stance,
saying: "It seems obvious that if those gains are not followed up by the rest of
the complex, then it might be tough for ali to go any higher."
    In other metals tin closed at $24,800 per tonne from $24,825 at the
close on Thursday, nickel closed at $18,375 a tonne from $18,255 and
lead at $2,433 from $2,406.5.
    
 Metal Prices at 1705 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       372.80       -0.95     -0.25     365.25      2.07
  LME Alum      2164.50        6.50     +0.30    2073.00      4.41
  LME Cu        8217.00       -9.00     -0.11    7931.00      3.61
  LME Lead      2435.00       28.50     +1.18    2330.00      4.51
  LME Nickel   18335.00       80.00     +0.44   17060.00      7.47
  LME Tin      24805.00      -20.00     -0.08   23400.00      6.00
  LME Zinc      2175.75      -13.25     -0.61    2080.00      4.60
  SHFE Alu     15140.00       50.00     +0.33   15435.00     -1.91
  SHFE Cu*     59480.00      120.00     +0.20   57690.00      3.10
  SHFE Zin     15780.00       20.00     +0.13   15625.00      0.99
 ** 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 Alison Birrane
and James Jukwey)
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