December 28, 2011 / 11:28 AM / 8 years ago

METALS-Copper down on euro zone, China slowdown worry

(Updates with closing prices)	
    * Union halts return to work at Freeport Indonesian copper mine
    * U.S. house prices declines in October
    * Euro falls against dollar, weighs on metals

    By Silvia Antonioli	
    LONDON, Dec 28 (Reuters) - Copper slipped on Wednesday in thin trade
as worries about the euro zone debt crisis resurfaced ahead of a debt auction in
Italy and as concerns over an economic slowdown in top metals consumer China
clouded demand growth prospects.	
    A report showing U.S. house prices declined in October weighed on market
sentiment, although improving U.S. labour market conditions lifted consumers'
confidence to an eight-month high in December.  	
    "The housing sector remains the weakest link, but the U.S. economy has
proved this quarter it is recovering better than expected," said Gianclaudio
Torlizzi of metals consultancy T-Commodity.	
    "What is making the market nervous is new worries about the euro zone crisis
ahead of the debt auction in Italy and worries that the Chinese government will
not be able to manage this physiological economic slowdown."	
    Benchmark copper on the London Metal Exchange lost 2.42 percent to
close at $7,465 a tonne from a close at $7,650 a tonne on Friday. Earlier, it
hit a session low of $7,437 a tonne, its lowest in almost a week.	
     The metal used in power and construction has lost more than 20 percent of
its value this year, the first yearly fall since 2008, when the credit crunch
hit most riskier assets.	
    The exchange was closed on Monday and Tuesday.	
    Weighing on metals, the dollar rose against a basket of currencies in thin
trade. 	
    A stronger U.S. unit makes dollar-priced commodities such as base metals
costlier for holders of other currencies.	
    News that the union at a Freeport McMoran Copper & Gold Inc mine in
Indonesia had halted a return to work after a three-month strike  failed to lift
prices as investors continued to focus on economic data. 	
    	
    THE CHINA FACTOR	
    As a sign of uncertainty over the extent of the slowdown in the Chinese
economy, shares in Shanghai fell to a 33-month low. 	
    China consumes about 40 percent of the global copper supply, and a slowdown
of industrial activity in the Asian country would have a significant impact on
base metals prices.	
    "Consumption of most of the base metals held up well in the first nine
months of the year. However ... most information relating to orders, shipments
and physical premiums are now pointing down," said Societe Generale in a
research note.	
    "Companies operating in downstream markets may need a number of months of
positive economic data before being convinced of the merits of raising
production." 	
    Fresh euro zone debt worries also hit financial markets.	
    Although Italian short-term debt costs halved at auction on Wednesday,
analysts warned that market tensions could easily reignite and pointed to a new
test on Thursday, when Italy will sell up to 8.5 billion euros of longer-term
bonds. 	
    The European Central Bank (ECB) allotted 489 billion euros to euro zone
banks last Wednesday in a liquidity injection that was the ECB's latest effort
to bolster bank finances. It hoped the move would minimise the chances of banks'
responding to the debt turmoil by slamming the brakes on lending. 	
    Investors worried, however, that the liquidity would not feed through the
system as banks deposited a record level of cash at the ECB. 
These worries were overdone, according to some analysts.   	
    "With all this liquidity around, I see prices moving upwards in the short
term, and I think today's copper price is a good opportunity to buy," Torlizzi
said.	
    Also weighing on risk appetite, Iran's threat to stop the flow of oil from
the Gulf supported crude prices but weighed on equity shares worldwide.
 	
    Aluminium closed at $1,999 from $2,016.	
    Tin finished at $18,600 from a last bid of $19,295 while zinc
, used to galvanize steel, ended at $1,810.50 from $1,855 Friday's close.	
    Battery material lead closed at $1,960 from $2,020 and nickel
, untraded at the close, was last bid at $17,900 from $18,505 at the
close on Friday.	
    	
 Metal Prices at 1714 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       339.40       -1.10     -0.32     444.70    -23.68
  LME Alum      1993.00      -23.00     -1.14    2470.00    -19.31
  LME Cu        7485.25     -164.75     -2.15    9600.00    -22.03
  LME Lead      1964.25      -55.75     -2.76    2550.00    -22.97
  LME Nickel   18221.00     -284.00     -1.53   24750.00    -26.38
  LME Tin      18970.00     -230.00     -1.20   26900.00    -29.48
  LME Zinc      1827.00      -28.00     -1.51    2454.00    -25.55
  SHFE Alu     15915.00       45.00     +0.28   16840.00     -5.49
  SHFE Cu*     55170.00      120.00     +0.22   71850.00    -23.22
  SHFE Zin     14755.00       45.00     +0.31   19475.00    -24.24
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
 	
    	
	
 (Editing by William Hardy)
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