November 8, 2012 / 11:17 AM / 5 years ago

METALS-Copper edges up; worries about US economy cap gains

* U.S. fiscal cliff concerns weigh on sentiment
    * Investors focus on China's leadership transition
    * ECB keeps interest rates on hold
    * Jump in zinc LME stock cancellations

 (Updates with closing prices)
    By Harpreet Bhal and Eric Onstad
    LONDON, Nov 8 (Reuters) - Copper edged higher on Thursday in cautious trade
ahead of a leadership transition in top metals consumer China, which may result
in fresh economic stimulus measures, while concerns about weak demand and the
U.S. economy capped the upside.
    Three-month copper on the London Metal Exchange did not trade at the
close but was bid at $7,630 a tonne, up 0.3 percent from Wednesday, after
recovering from an earlier low of $7,571, a decline of 0.5 percent.
    The key industrial metal has shed nearly 10 percent since touching a peak of
$8,422 on Sept. 19, hit by worries about slow global growth, weak demand and
more recently, the potential f9or a U.S. fiscal cliff of spending cuts and tax
hikes, which experts say could cause a recession.
    On Wednesday copper hit a two-month low at $7,563.25 a tonne.   
    "We could see some interesting moves in the metals space due to index
rebasing towards the end of the year, and we might see a bit of a bounce in base
metals prices," said Citi analyst David Wilson. 
    The two major commodity indexes, the S&P GSCI and Dow Jones-UBS
Commodity Index, are rebalanced each year by altering their commodities
mix. Tracker funds change their weightings in line with the indexes, resulting
in contracts being bought or sold.     
    " But through November it is difficult to see what is going to move prices
significantly higher or significantly lower. We see bits and pieces of consumer
buying at lower numbers, but sentiment is not particularly positive at the
moment."
    Goldman Sachs analyst Max Layton said the investment bank was bullish about
copper in the first half of next year.
    "We expect an end to downstream Chinese de-stocking, strong construction
completions growth, a sustained pick-up in Chinese property sales and strong
growth in infrastructure FAI (fixed asset investment) to offset ongoing weakness
in other sectors," he said in a note.
    Metals prices were pressured as the euro fell to a two-month low after the
European Central Bank kept interest rates at a record low and said the euro zone
economy showed little sign of recovering before the year-end. 
 
    A strong dollar makes commodities priced in the currency more expensive for
holders of other currencies.
    Reinforcing the downbeat sentiment, data showed German exports slid at their
fastest pace since late last year and that imports also fell in September,
adding to evidence the euro zone crisis has begun to inflict a heavy toll on the
currency bloc's largest economy. 
       
     
    CHINA LEADERSHIP TRANSITION
    Investors kept an eye on China's once-a-decade leadership transition event,
the 18th Party Congress, which opened on Thursday, for hints of any imminent
stimulus measures or future policy direction that might affect metals demand.
  
    "So far, the content of speeches from the 18th Party Congress has been
within expectations. There hasn't been anything particularly encouraging to
investors," said Orient Futures derivatives director Andy Du. 
    Analysts also warned that supplies of copper concentrates were growing at a
rate that might eventually cause a jump in global refined copper inventories. 
    "The third-quarter jump in Chilean copper concentrates exports and the
continued rise in China's copper concentrates production would eventually push
refined global copper output up," research firm Minmetals Futures said in a
note. 
    "Much of the excess supplies may end up in ShFE warehouses. They may also
end up in LME Asian warehouses through Chinese smelters that are able to export
copper under discounted duties if they booked these under their tolling book.
    In other metals, lead climbed 1.4 percent to close at $2,207 a tonne
as analysts tipped the metal for outperformance next year.
    "The rapidly expanding demand for lead-acid batteries in China appears to be
at odds with the ongoing tightening of environmental regulations, suggesting a
widening Chinese deficit in the years ahead," Nic Brown, head of Natixis
commodity research, said in a note.
    "Our forecasts for lead prices anticipate a significant outperformance
versus other base metals in 2013, and evidence from recent weeks reinforces our
bullish view on this metal."
    Zinc surged 1.7 percent to finish at $1,929 a tonne after cancelled
warrants, or the metal earmarked for delivery in LME-registered warehouses,
climbed to 684,650 tonnes or 41 percent of total stock. 
    LME data MZNSTX-TOTAL showed a 30,000 tonne jump in cancelled warrants in
warehouses in Antwerp, cutting the amount of metal available to consumers.
    Aluminium ended 0.3 percent firmer at $1,925 a tonne while nickel
 added 1.0 percent to $16,160. Tin did not trade at the close,
but was bid at $20,500, up 1 percent.
    
 Metal Prices at 1718 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       346.25        2.10     +0.61     344.75      0.44
  LME Alum      1922.00        2.00     +0.10    2020.00     -4.85
  LME Cu        7634.25       24.25     +0.32    7600.00      0.45
  LME Lead      2212.25       36.25     +1.67    2034.00      8.76
  LME Nickel   16127.00      132.00     +0.83   18650.00    -13.53
  LME Tin      20551.00      251.00     +1.24   19200.00      7.04
  LME Zinc      1925.25       29.25     +1.54    1845.00      4.35
  SHFE Alu     15280.00      -55.00     -0.36   15845.00     -3.57
  SHFE Cu*     55740.00     -820.00     -1.45   55360.00      0.69
  SHFE Zin     14875.00      -50.00     -0.34   14795.00      0.54
 ** 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 Carrie Ho in Shanghai; Editing by Alison Birrane and
Jane Baird)

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