January 7, 2009 / 2:35 AM / 11 years ago

METALS-Base metals' march falters as index effect fades

 * London copper pares 5 pct rise as index buying subsides
 * Benchmark Shanghai copper suspended, front month limit up
 * Other metals also give ground; New Year rally vulnerable  (Updates prices, adds quotes)
 By Nick Trevethan
 SINGAPORE, Jan 7 (Reuters) - London copper prices pared an early 5 percent gain on Wednesday as investor clamour for industrial raw materials ahead of a re-weighting of the Dow Jones AIG .DJAIG and S&P GSCI .SPGSCI commodities indices faded.
 The Dow Jones index is adding weight to copper traded on the New York Mercantile Exchange’s COMEX division and takes place from Jan. 9 to 15. Re-weighting the S&P GSC will take place from Jan. 8 to 14. For an index weighting factbox, click: [ID:nSP381552]
 Three-month copper MCU3=LX on the London Metal Exchange rallied 5.3 percent to a one-month high of $3,570 a tonne in early trade, a gain of more than 16 percent from the end of 2008.
 “Commodity  markets have had a good run. Everyone hopped on the rebalancing and we have been advising clients to find somewhere to jump off again,” a metals trader in Singapore said.
 By 0706 GMT prices had eased back to $3,460, up 2.1 percent on the day.
 “There are some signs that risk appetite is increasing early this year, judging by currency movements, for example. But macro data is still weak, we are not out of the woods yet,” Barclays Capital analyst Yingxi Yu said.
 “The gains are partly attributable to short-covering ahead of the index rebalancing. Without a meaningful pick-up in demand, current copper price levels look hard to sustain and the rally would be short-lived.”
 The benchmark March copper contract on the Shanghai Futures Exchange SCFH9 was suspended after it hit its upside limit for three consecutive days, trying to chase the New Year surge in London futures.
 Front month copper in Shanghai SCFc1, which was not suspended, jumped 6 percent to its upside limit at 28,760 yuan ($4,207).
 Other metals pared gains. Shanghai zinc SZNc3 hit its 5 percent limit, before closing down 1.8 percent at 10,940 and aluminium in London and Shanghai also faded.
 “With demand weak and the environment still very tough, production cuts are likely to continue,” Yu said.
 Australian-listed Aditya Birla Minerals Ltd ABY.AX placed its Mt Gordon copper mine in the northeastern state of Queensland on care and maintenance because of low copper prices, the company said on Wednesday. [ID:nSYD361356]
 Swedish copper and zinc miner and smelter Boliden (BOL.ST) is considering placing its Tara zinc mine in Ireland on care and maintenance, a union representing workers at the operation said on Tuesday. [ID:nL6709343]
 In Peru, Volcan VOL_pb.LM has halted work at its Cerro de Pasco zinc mine  because of weak prices prices and tension with the surrounding town, a union official said. [ID:nN06425838]
 London zinc MZN3 fell 1.1 percent to $1,305.
 LME aluminium MAL3 added 2 percent to $1,635, just off an earlier one-month high of $1,639 and Shanghai metal SAFc3 rose 4 percent to 12,590 yuan and came within a whisker of its upside limit at 12,545 yuan on news that Alcoa Inc (AA.N) will make further cuts to production. [ID:nN06444898]
 The company plans to slash more than 15,000 jobs and extend production cuts by more than 135,000 tonnes per year to total 750,000 tonnes or 18 percent of the company’s capacity. This follows announcements of curtailments in October and November.  Metals prices at 0706 GMT  Metal         Last       Change   Pct Move  End 2008  Pct chg 09  LME Cu        3460.00     70.00     +2.06    3060.00     13.07  SHFE Cu*    Suspended                       23840.00  LME Alum      1605.00      1.00     +0.06    1535.00      4.56  SHFE Alum*   12170.00     70.00     +0.58   11540.00      5.46  COMEX Cu**     156.60      0.00     +0.00     139.50     12.26  LME Zinc      1305.00    -14.00     -1.06    1208.00      8.03  SHFE Zinc    10940.00   -205.00     -1.84   10120.00      8.10  LME Nickel   13000.00   -250.00     -1.89   11700.00     11.11  LME Lead      1185.00      7.00     +0.59     999.00     18.62  LME Tin      12075.00     75.00     +0.63   10700.00     12.85  Dollar/yuan          6.8334 \ 6.8344  ** 1st contract month for COMEX copper   * 3rd contact month for SHFE aluminium, copper and zinc  (Editing by Clarence Fernandez)              

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