August 21, 2012 / 9:53 AM / 5 years ago

METALS-Copper jumps to one-month high on hopes of ECB action

* Euro hits seven-week high versus dollar on renewed ECB hopes
    * Slower growth in China, euro zone risks to limit gains
    * COMEX trading volume surges to more than 81,000 lots


    By Eric Onstad and Josephine Mason
    LONDON/NEW YORK, Aug 21 (Reuters) - Copper jumped to a one-month high on
Tuesday on optimism that the European Central Bank is drawing up a strategy to
tackle the euro zone debt crisis, although some investors expressed wariness
about further gains. 
    The euro rallied to a seven-week high versus the dollar as talk of ECB
action to ease Spanish and Italian borrowing costs resurfaced, even though the
central bank had tried to quash such speculation on Monday. 
    A strong euro makes dollar-priced copper cheaper for European investors.
    Further gains in copper are likely to be limited by the euro zone debt
crisis, slower growth in top metal consumer China and a stuttering recovery in
the United States, the world's largest economy, some analysts said. 
    "You've got hopes about the ECB again ... but the general trend hasn't
changed much from July. We're still fairly range-bound," Citi analyst David
Wilson said. "Markets are nervous about taking outright positions in either
direction."
    Three-month copper on the London Metal Exchange jumped 2.1 percent
to close at $7,610 per tonne, having touched a session peak of $7,632, the
highest since July 20. The metal breached the range of $7,300 to $7,600 it had
held over the past month.
    In New York, COMEX copper for September delivery also hit a one-month
high, rising as much as 2.8 percent to $3.4665 per lb on hefty volume. It eased
off those highs to settle at $3.453, up 2.4 percent.
    Trading volume was huge. Some 81,425 lots changed hands, double the 30-day
average and well above the 250-day average of 50,419 lots, according to Thomson
Reuters data. The flurry of activity is all the more significant as it comes at
the height of the Northern Hemisphere summer holiday. 
    The reasons behind Tuesday's jump in COMEX volume were not immediately
clear. Other recent data, however, has pointed to growing liquidity in the New
York contract, eating into its larger London rival's market share.
 
    Open interest, considered a measure of liquidity in a market, has held firm
around 154,000 lots on COMEX copper, while that on the larger London contract
sank to 2007 lows around 229,884 lots on Monday.
    Measured in tonnage, the liquidity in the LME's second-most-active contract
represents 5.7 million tonnes of refined metal, dwarfing COMEX's equivalent of
1.7 million tonnes.
    Even so, the data suggests August will build on COMEX's already strong
performance so far this year. Its average volume rose more than 50 percent
year-on-year in the first seven months of 2012, while LME copper volume grew by
16 percent.
        
    TAKING HEART
    Markets took heart from a report in British newspaper The Daily Telegraph,
which said it could confirm weekend reports that ECB experts were examining
plans effectively to cap Spanish and Italian yields. The bank has denied such
speculation.  
    In China, risk assets including copper received a modest boost after local
media reported the city of Chongqing was planning to invest $236 billion in
seven major industries. 
    Import data from the world's top consumer, meanwhile, showed a marginal rise
for July, with shipments of refined copper into China at 254,339 tonnes versus
250,097 tonnes in June.  
    "For now, with no clear trading direction, LME copper will be stuck within a
range of $7,200-$7,800. But downside risks will increase over the longer term as
Chinese consumer demand remains weak with no sign of improvement in global
economics," said Andy Du, derivatives director at Orient Futures. 
    Chief Executive Ivan Glasenberg of Glencore saw potential for
stronger demand in China toward the year-end.
    "I think we've got to watch China carefully to see what type of stimulus
they will or won't put into place... personally I believe you will see more
infrastructure spending in the second half," he told a conference call after the
commodity trade house released interim results.   
     
    
    CHINA PHYSICAL ALUMINIUM MARKET WEAK 
    In other LME metals, packaging material aluminum gained 1.6 percent
to close at $1,867 a tonne, having touched a session and one-week high of
$1,878.75. Last week it hit $1,827.25, its weakest point since November 2009.
    Although the latest aluminum production figures point to falling daily
output in China, physical traders said the market still feels sluggish.
  
    In industry news, an alumina refinery 33 percent owned by Aluminum Corp of
China Ltd  and located in the southwestern region of Guangxi
is being temporarily shut on environmental grounds, company sources said,
further curbing local supply of alumina. 
    Soldering metal tin finished 2.2 percent stronger at $18,950 a
tonne, its highest in a month.
    Latest LME stocks data showed nearly half the exchange-registered material
is still "cancelled", set to leave warehouses. Also indicating tightness in
nearby supply, cash tin traded at a premium of $1 a tonne over the
benchmark three-month price.
    Zinc and lead came off highs after market balance data from the
International Lead and Zinc Study Group showed the global zinc market was in
surplus by 152,000 tonnes in the first six months of the year, and lead was in
surplus by 48,000 tonnes.  
    Zinc, used in galvanizing, ended up 0.8 percent at $1,810 a tonne,
off a high of $1,838.25; battery material lead edged up 0.3 percent to
close at $1,914, off a three-week high of $1,944.75; while stainless-steel
ingredient nickel gained 1.8 percent to $15,825.
    
    
 Metal Prices at 1832 GMT
                                                                      
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       344.75        7.65     +2.27     343.60      0.33
  LME Alum      1866.50       29.50     +1.61    2020.00     -7.60
  LME Cu        7609.00       70.00     +0.93    7600.00      0.12
  LME Lead      1914.00        5.00     +0.26    2035.00     -5.95
  LME Nickel   15800.00      250.00     +1.61   18710.00    -15.55
  LME Tin      18950.00      400.00     +2.16   19200.00     -1.30
  LME Zinc      1810.00       14.00     +0.78    1845.00     -1.90
  SHFE Alu     15250.00       20.00     +0.13   15845.00     -3.76
  SHFE Cu*     55030.00      160.00     +0.29   55360.00     -0.60
  SHFE Zin     14510.00      100.00     +0.69   14795.00     -1.93
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07

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