October 10, 2011 / 9:34 AM / in 9 years

METALS-Copper up for fourth day on euro zone crisis pledge

* Copper ends up for fourth straight session
    * German/Franco crisis proposal triggers risk rally
    * Copper inventories drop, Chinese seen buying on dips
    * Coming up: UK industrial production data on Tuesday

    By Chris Kelly and Harpreet Bhal
    NEW YORK/LONDON, Oct 10 (Reuters) - Copper pushed higher for a
fourth straight day on Monday after a promise from German and
French leaders to resolve the European debt crisis dented the
dollar's safe-haven appeal and ignited a broad-based risk rally.
    German Chancellor Angela Merkel and French President Nicolas
Sarkozy promised on Sunday to unveil a comprehensive new package
to resolve the debt crisis by the end of October, giving some
markets a respite from a September slaughter which saw copper lose
more than a quarter of its value.
    With investors more confident that the crisis will be
resolved, money began to flow back into the copper market, and
demand signals began to percolate as top consumer China returned
from its Golden Week holiday.
    In just one week, prices are up nearly 13 percent from
14-month lows beneath $6,700 per tonne.
    "I am not surprised to see a bit of a rally in copper, with
concerns about the economic situation, mainly in Europe, not being
as dire as they were previously thought to be," said Catherine
Virga, senior base metals analyst with CPM Group in New York.
    London Metal Exchange (LME) benchmark three-month copper rose $120 to close at $7,495 a tonne.
    In New York, the key December COMEX contract surged
9.45 cents, or 2.9 percent, to settle at $3.3680 per lb, near the
upper end of its $3.2775 to $3.3910 session range.
    But, as has been the case during this four-day rally, volumes
remained on the light side. A little more than 37,000 lots traded
in New York, more than a third below the 30-day norm, according to
preliminary Thomson Reuters data.
    "The market is likely to remain on tenterhooks for a little
while yet as far as Europe is concerned. We are still not out of
the woods yet," said Nic Brown, head of commodity research at
Natixis.
    "Until we get some sort of longer-term solution and fiscal
sustainability in countries like Greece, I don't think we are
there yet."
    Copper was also supported by the biggest rally in the euro
against the dollar in 15 months after the German/Franco pledge
helped boost the currency by more than 2 percent. A weak dollar
makes commodities priced in the U.S. unit cheaper for holders of
other currencies.COPPER STOCKS DROP
    Chinese buying was muted in the first trading day after a
week-long holiday, and analysts cautioned that it was too soon to
tell whether Chinese demand for copper was starting to improve.
    "With the return of the Chinese market participants after the
Golden Week, LME copper has been getting some support at current
levels," Barclays Capital said in a note. "But the mood of Chinese
copper buyers remain cautious.
    "The Chinese are also likely awaiting greater clarity on the
comprehensive solution to the Greek sovereign debt overhang and
recapitalization of European banks before they would be
comfortable to build long positions," BarCap said.
    The latest data showed copper stocks in LME-registered
warehouses dropped 4,575 tonnes to 462,525 tonnes, with large
amounts leaving warehouses in South Korea. 
    "It is clear that the latest correction in LME prices resulted
in metal going into China. With the decline in Shanghai bonded
warehouse stocks, you are now seeing buying from Chinese merchants
feeding into LME stockpiles," Natixis' Brown said.
    "Whether this is an indication of strong demand or an
indication of opportunistic restocking, it's still too early to
tell."
    The data also showed a jump in canceled copper warrants in
warehouses in Malaysia's Klang and South Korea's Gwangyang, Busan
and Incheon Port. Canceled warrants represent the amount of metal
earmarked for delivery to a buyer.
    In Klang, canceled warrants represented 81.35 percent of
stocks. In early August, canceled warrants stood at just 1.5
percent of total stocks.
 Metal Prices at 1752 GMT
 COMEX copper in cents/lb, LME prices in $/T and SHFE prices in
yuan/T
 Metal            Last      Change  Pct Move   End 2010   Ytd Pct
                                                            move
 COMEX Cu       337.65       10.30     +3.15     444.70    -24.07
 LME Alum      2258.00       30.00     +1.35    2470.00     -8.58
 LME Cu        7494.00      119.00     +1.61    9600.00    -21.94
 LME Lead      2005.00       61.00     +3.14    2550.00    -21.37
 LME Nickel   19380.00      470.00     +2.49   24750.00    -21.70
 LME Tin      23050.00      150.00     +0.66   26900.00    -14.31
 LME Zinc      1950.00       30.00     +1.56    2454.00    -20.54
 SHFE Alu     16675.00       35.00     +0.21   16840.00     -0.98
 SHFE Cu*     54480.00     -310.00     -0.57   71850.00    -24.18
 SHFE Zin     15110.00     -290.00     -1.88   19475.00    -22.41
** 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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