METALS-Copper reverses gains as mine output rises

Fri Jan 25, 2013 5:38pm GMT

* ECB's Draghi expects euro zone recovery this year
    * Brighter outlook boosts equities, oil
    * U.S. new home sales fall, but housing recovery still on track

    By Susan Thomas
    LONDON, Jan 25 (Reuters) - Copper fell on Friday as reports of higher
production at the world's third-largest miner of the metal offset a soft dollar
and signs of recovery in the United States, Europe and China.
    Data showing new U.S. single-family home sales fell in December also weighed
on copper, although the housing recovery still appears to be on track.
Construction is a significant market for copper with a little over 400lbs of
copper used in a typical U.S. home. 
    Anglo American's Chilean Collahuasi mine posted a better than
expected rise in production to 172,900 tonnes, up 2 percent year-on-year.
 
    Three-month copper on the London Metal Exchange closed at $8,030 a
tonne, reversing earlier gains that took it close to a two-week high. It
finished the previous session at $8,095.5. 
    "It's been pretty choppy trading, but not showing signs of any kind of
collapse so we're reasonably positive for the first quarter," BNP Paribas
analyst Stephen Briggs said.
    "Base metals have under-performed stock markets. We've had a generally
strong risk-on start to the year which has done a lot for stock markets. In
comparison with that base metals have been pretty tepid, so there is potential
for catch-up given that underperformance."
    Copper has been caught in a band of $7,920 to $8,250 a tonne so far this
year, after an early January rally to 2-1/2 month highs fizzled out. 
    The broad Standard and Poor's 500 stock market index is up more than
5 percent so far this year, compared with LME benchmark copper, which has risen
around 2 percent.
    "Investor conviction towards base metals remains muted with a focus on how
conditions evolve post the New Year's holiday in China as critical to
performance," Barclays said in a research note.
    China's markets will be closed from Feb. 11 to Feb. 15 for the Lunar New
Year.
    Barclays also said Chinese metals data for December continued to point
towards a trend of constrained metal imports and strong domestic metal output.
    "Base metal prices have largely remained range bound over the past week, as
the tension between macro and micro factors continues to limit any sustained
periods of directional trend," the Barclays note said.
    "Indeed, a series of meetings both in London and New York have largely
provided us with evidence that investor conviction towards the complex remains
as weak as it was for much of 2012."
    However, manufacturing in China and the United States grew this month at the
fastest pace in about two years while data suggested German growth picked up
boosted hopes for the battered euro zone. 
    European Central Bank President Mario Draghi also expects the euro zone
economy to recover later this year, adding that financial market improvements
have not yet trickled into the general economy. 
    The brighter outlook lifted shares and oil prices and the euro extended a
rally against the dollar. A weaker dollar usually makes commodities priced in
the currency cheaper for holders of other currencies, like the euro.
   
    
    Q2 PICK-UP? 
    "Data is improving in Europe and the United States and most importantly also
from China, such as we saw in the steady improvement in the HSBC flash PMI
yesterday," said strategist Nick Trevethan of ANZ in Singapore.
    "We should see a little bit of a pick-up in quarter two after the Chinese
New Year, and we should start to see acceleration in demand in the second half
of the year - but expect range trading in the next three weeks before then."
    Three-month LME aluminium closed at $2,046 per tonne from $2,076 at
the close on Thursday, and tin at $24,700 from a last bid of $24,625.
    Three-month zinc closed at $2,080 from a last bid of $2,089, and
lead at $2,355 from $2,403. Nickel, untraded at the close, was
bid at $17,380 per tonne from $17,390.
 Metal Prices at 1712 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2012   Ytd Pct
                                                              move
  COMEX Cu       364.25       -2.55     -0.70     365.25     -0.27
  LME Alum      2049.50      -26.50     -1.28    2073.00     -1.13
  LME Cu        8028.25      -67.25     -0.83    7931.00      1.23
  LME Lead      2363.00      -40.00     -1.66    2330.00      1.42
  LME Nickel   17347.00      -43.00     -0.25   17060.00      1.68
  LME Tin      24700.00      250.00     +1.02   23400.00      5.56
  LME Zinc      2080.25       27.25     +1.33    2080.00      0.01
  SHFE Alu     15225.00       -5.00     -0.03   15435.00     -1.36
  SHFE Cu*     58640.00      210.00     +0.36   57690.00      1.65
  SHFE Zin     15635.00      165.00     +1.07   15625.00      0.06
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07