METALS-Copper up on Greek hopes but China demand weighs

Fri Nov 23, 2012 5:27pm GMT

* Weak demand reflected in rising China copper inventories
    * IMF, European Union narrow differences on Greek debt reduction
    * Deals likely in Shanghai next week for 2013 copper term shipments

    By Susan Thomas and Maytaal Angel
    LONDON, Nov 23 (Reuters) - Copper rose on Friday, helped by a weaker dollar
and signs of progress in negotiations to get funds to Greece, though gains were
limited by concerns over weak demand, especially in top metals consumer China. 
    The dollar hit a three-week low versus the euro, amid reports that the
International Monetary Fund and the European Union had narrowed their
differences over the Greek debt reduction target. 
    A weaker dollar makes dollar-priced metals cheaper for European and other
non-U.S. investors.
    Also helping copper was the latest survey of German companies by the
Munich-based Ifo think-tank, which found firms were becoming more upbeat about
the outlook despite the euro zone crisis.
    But gains were tepid for the red metal, due to weak demand in China, with
the Shanghai Futures Exchange reporting earlier that copper inventories in its
warehouses rose 1.2 percent from last Friday. 
    Also, copper stocks in China's bonded warehouses hit a record high of over
one million tonnes late last week and inventories are expected to rise by around
100,000 tonnes by the end of the year due to weak domestic demand.
 
    "Global risk appetite is muted and China has been building inventory across
a number of markets, highlighting lackluster demand," Standard Chartered analyst
Dan Smith said.
    "We expect to see further increases heading into year-end, hence imports are
likely to remain weak." 
    Three-month copper on the LME ended up 0.70 percent at $7,777 per
tonne, from Thursday's close of $7,715. The metal was still on track for a
quarterly loss, however.
    Demand for industrial metals such as copper has weakened this year as 
China's economic growth has been hit by a decline in manufacturing activity in 
Europe, its main export market.
    More recently, however, hopes that U.S. lawmakers can agree steps to avoid a
fiscal crisis and upbeat factory data, showing a return to growth in both China
and the United States, has put a floor under prices. 
        
    TACTICAL VIEW
    Credit Suisse has upgraded its tactical view on commodities to positive, it
said in a note on Friday.
    "We think the sector could see further moderate gains toward year-end.
Leading indicators show that economic growth has bottomed. This is positive for
cyclical assets like commodities," it said.
    Volumes were modest after Thursday's Thanksgiving holiday in the United
States, with copper trading just over 9,946 lots by 1538 GMT.
    Next week, the copper industry meets in Shanghai during Asia Copper Week, as
Chinese buyers hammer out terms with Chile's Codelco and BHP Billiton,
among others, for 2013 term shipments and processing fees.
    Traders say Chinese buyers and smelters have a stronger hand this year,
given slowing demand and rising supply.
    In term talks this year, Codelco has offered Japanese copper customers a
2013 term premium of $85 a tonne, down 9 percent from its 2012 premium,
reflecting a slowdown in demand in Japan and the global economy. 
    Tin closed up at $20,850 a tonne from a last bid of $20,455 on
Thursday, while zinc, used in galvanising, ended up at $1,961 a tonne
f r om a close of $1,925, having hit its highest since mid-October at $1,967
earlier.
    LME data showed 35,700 tonnes of zinc were booked to leave warehouses in
Antwerp, where there is a multi-month queue to withdraw metal. Only 7,150 tonnes
out of 163,150 tonnes of zinc in that location is on warrant or available.
    Battery material lead closed up at $2,195 a tonne from $2,165,
having earlier hit its highest since Nov. 9. at $2,213. Aluminium closed
up at $1,983 a tonne from $1,944.50, and nickel ended up at $16,620 a
tonne from $16,550.
    LME data showed aluminium stocks hit a new record high of 5.177 million
tonnes after large deliveries into Vlissingen, where there is a costly queue of
around a year to withdraw metal. 
    In lead, data showed a large 18,525 tonnes booked to leave warehouses in
backlogged Antwerp, meaning lead supplies in an already tight market will be
even harder to come by.
 Metal Prices at 1713 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2009   Ytd Pct
                                                              move
  COMEX Cu       352.40        2.80     +0.80     334.65      5.30
  LME Alum      1982.00       37.50     +1.93    2230.00    -11.12
  LME Cu        7777.00       62.00     +0.80    7375.00      5.45
  LME Lead      2196.00       31.00     +1.43    2432.00     -9.70
  LME Nickel   16610.00       60.00     +0.36   18525.00    -10.34
  LME Tin      20845.00      420.00     +2.06   16950.00     22.98
  LME Zinc      1961.00       36.00     +1.87    2560.00    -23.40
  SHFE Alu     15340.00        5.00     +0.03   17160.00    -10.61
  SHFE Cu*     56140.00      100.00     +0.18   59900.00     -6.28
  SHFE Zin     15045.00       50.00     +0.33   21195.00    -29.02
 ** 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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