January 11, 2012 / 11:34 AM / in 8 years

METALS-Copper up on demand optimism, weak euro caps gains

* Norsk Hydro plans production cuts at Australian plant
    * Euro drops to 6-month low vs dollar
    * China import data helps, economic concerns remain

    By Susan Thomas and Harpreet Bhal	
    LONDON, Jan 11 (Reuters) - Copper rose on Wednesday,
adding to gains from the previous session when it rallied more
than 3 percent on strong Chinese import figures, but further
gains were capped by a weak euro and concerns about the euro
zone's growing debt crisis. 	
    Three-month London Metal Exchange (LME) benchmark
copper ended at $7,785 a tonne, up 0.5 percent from
$7,745 at the close on Tuesday. 	
    "I wouldn't be too excited about metals at the moment.
Copper has been rangebound for the last few weeks with the
upside capped around the $8,000 level. It's all about the euro
zone debt crisis," said Andrey Kryuchenkov, analyst at VTB
Capital. 	
    The euro fell to a 16-month low against the dollar,
pressured by comments from a senior official at ratings agency
Fitch told Reuters the European Central Bank should do more to
tackle the region's debt crisis. 	
    A strong dollar makes commodities priced in the U.S. unit
more expensive for holders of other currencies.	
    Investors were encouraged by data on Tuesday showing a surge
in China's copper imports for December, raising expectations
that demand from the metal's top consumer could improve. 	
    "People were a little bit surprised yesterday by the
strength of the Chinese imports, particularly in copper,"
Natixis analyst Nic Brown said. "Our overall view on China
demand for copper this year is that it's going to be good."	
    But he cautioned against reading too much into the numbers. 	
    "There were ample import arbitrage opportunities in the
October/November period. And in December they largely went away.
This is reflective of a number of factors," Brown said.	
    "You've still got concerns over Chinese growth prospects,
you've got tight monetary conditions going into year end, plus
you also have a very early Chinese New Year this year."	
    China's offices and exchanges will be shut in the last week
of January for the Lunar New Year holidays, with Chinese
consumers holding back purchases ahead of the holiday season.	
    "In the coming weeks the market is expected to be a bit
quiet because the Chinese will be off for the Lunar New Year so
we are likely to continue to trade off news about the euro zone
debt crisis," Kryuchenkov said. 	
    Looking further ahead, copper could touch record levels near
$10,000 a tonne by the end of the year, according to the chief
economist at trading house Trafigura, with tin seen rising to
$25,000 to $30,000 a tonne by year-end while zinc could hit
$2,400 to $2,500 a tonne. 	
    	
     
  	
    PRODUCTION CUTS	
    Chinese imports of aluminium also rose last month, and this
has helped support aluminium prices, as has news of production
cuts.	
    Norway's Norsk Hydro became the latest aluminium producer to
cut production due to economic uncertainty and high costs,
announcing plans to curtail output at a plant in Australia.
 	
    Last week, Alcoa Inc, the largest U.S. producer of
aluminium, was the first to announce a cutback in response to
steep aluminium price falls, slashing annual global smelting
capacity by 12 percent. 	
    This could signal cuts at China producers too.	
    "A substantial chunk of the industry (in China) is likely to
be in negative territory given where prices are at the minute,"
Brown said.	
    "Plus you've got the emphasis on environmental policies,
energy intensity policies, so we think there is pressure to
constrain Chinese output of aluminium."	
    However, there are still plentiful inventories of aluminium
in warehouses, keeping a lid on further rises in the price of
the metal.	
    Three-month aluminium ended at $2,165 a tonne, from
$2,164 at the close on Tuesday.	
     Credit Suisse said more evidence than the Chinese import
data was needed before a bottom in base metals prices could be
confirmed.	
    "For now, technical momentum remains largely negative across
the sector," it said in a note. "However, the latest positive
performance coupled with the improved sentiment mark a good
start."	
    Tin ended at $20,475 from $20,275, zinc at
$1,936 from $1,930 while lead was at $1,990 from $1,989.	
    Nickel closed at $19,450 from $19,505. 	
	
    	
 Metal Prices at 1707 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       352.00        0.90     +0.26     444.70    -20.85
  LME Alum      2162.75       -1.25     -0.06    2470.00    -12.44
  LME Cu        7765.25       20.25     +0.26    9600.00    -19.11
  LME Lead      1988.00       -1.00     -0.05    2550.00    -22.04
  LME Nickel   19331.00     -174.00     -0.89   24750.00    -21.89
  LME Tin      20410.00      135.00     +0.67   26900.00    -24.13
  LME Zinc      1928.50       -1.50     -0.08    2454.00    -21.41
  SHFE Alu     16190.00      120.00     +0.75   16840.00     -3.86
  SHFE Cu*     56860.00      990.00     +1.77   71850.00    -20.86
  SHFE Zin     15080.00      160.00     +1.07   19475.00    -22.57
 ** 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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