* Copper market deficit in Jan to Sept lower than in Jan to
* Copper used as a hedge against depreciating yuan
(Adds closing prices)
By Pratima Desai
LONDON, Dec 21 Copper prices held steady on
Wednesday but remained under pressure from worries about an
oversupplied market and funds cutting bets on higher prices over
Benchmark copper on the London Metal Exchange ended
up 0.2 percent at $5,515 a tonne. That compares with the
four-week low of $5,459 hit on Monday.
Expectations of stronger global economic and demand growth
have helped copper rise nearly 20 percent since October.
But much of that rise has been due to buying by funds
jumping on a rising trend, which has stalled in recent days.
That combined with forecasts of a surplus next year could
see copper fall further, analysts and traders said.
"Copper might drift lower over the next year. It shouldn't
go below $4,500, below that is where you see supply leaving the
market," said SP Angel analyst Sergey Raevskiy. "The floor
should be $4,500-$5,000."
Key to copper demand and prices is China, which accounts for
nearly half of global consumption estimated at around 22 million
tonnes this year. Chinese demand has been stronger than expected
in 2016 due to government stimulus, but analysts say the numbers
should be treated with caution.
"You've seen demand from people in China worrying about the
depreciation of their currency ... Copper is being used as a
hedging instrument, it's not for consumption," Raevskiy said.
"If we see the yuan depreciate further, it could help copper."
The yuan has fallen more than five percent
against the dollar since the middle of August.
Also weighing on copper is a dwindling market deficit, which
according to the International Copper Study Group (ICSG) fell to
29,000 tonnes in the Jan-Sept period from a deficit of 227,000
tonnes between January and June.
"This is because China has so far purchased significantly
less copper on the world market in the second half of the year
than it did in the first half," Commerzbank said in a note.
"Given this, we see no justification for the steep rise in the
copper price for a time from the end of October."
Aluminium closed up 0.2 percent at $1,725 a tonne,
zinc fell 0.6 percent to $2,620 and lead slid
0.6 percent to $2,182.
Tin lost 0.1 percent at $20,905 and nickel
ceded 0.6 percent to $10,860.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Most active ShFE nickel
Three month LME tin
Most active ShFE tin
(Additional reporting by Melanie Burton; Editing by Alexandra
Hudson and David Evans)