October 23, 2012 / 5:13 AM / 7 years ago

METALS-Copper hits fresh 6-wk low; Fed, China eyed

* Outlook for base metals hangs on China policies - analyst
    * China cabinet seeks ambitious economic reforms - advisers
    * Fed likely to hold off on fresh actions
    * Coming Up: U.S. Fed begins two-day meeting

 (Updates prices; adds comment, detail)
    By Carrie Ho
    SHANGHAI, Oct 23 (Reuters) - Copper fell to fresh six-week
lows on Tuesday as investors played safe ahead of a U.S. Federal
Reserve policy meeting, while awaiting China's next policy
    Investors are expected to stick to safe plays until after
the Fed's two-day meeting which begins on Tuesday, though the
central bank is likely to hold off from fresh steps, opting to
review the impact of action it took last month. 
    While any announcements by the Fed can affect short-term
trading patterns, China is the factor that can affect base
metals' longer-term outlook, traders said. 
    "The market is clearly still looking to China as the real
driver and the rest of the world is only providing a bit of
short-term noise," RBC Capital Markets said in a note. 
    Analysts said investors were looking for hints of new
stimulus policies or economic reforms by China ahead of its
once-a-decade leadership transition at the 18th Communist Party
Congress, which begins on Nov. 8.     
    "Everyone wants confirmation that the new Chinese leaders
will introduce new policies to spur the economy, particularly in
construction and property," said a Shanghai-based trader.
    "Base metals' recent price movements have merely been
consolidations within a bearish trend. Eventually, prices will
fall if nothing appears on the horizon to drive them up."
    For now, there are signs that China's leaders may roll out
some painful reforms, although it is still unclear how this will
affect metals demand. 
    Beijing has asked policy think-tanks to draw up their most
ambitious economic reform proposals in decades, which could curb
the power of state firms and give more freedom to the setting of
interest rates and the yuan currency. 
    Three-month copper on the London Metal Exchange 
inched down 0.4 percent to $7,920.75 per tonne by 0702 GMT,
after dipping to a session trough of $7,914, its lowest since
Sept. 7. 
    The most active January copper contract on the Shanghai
Futures Exchange fell 1.1 percent to 57,280 yuan
($9,200) per tonne, also its lowest since Sept. 7.
    In China's physical markets, traders said copper prices were
supported by some seasonal buying, although volumes were slight
in comparison with the same period in previous years. 
    This can be seen in Chinese spot copper prices, which are
still trading at a discount to the ShFE front month contract
 of up to 100 yuan, down from up to 200 yuan last week,
but still pointing to sluggish downstream demand. 
    "October is usually the start of the fourth quarter
peak-season buying in copper, but we still haven't seen a lot of
restocking so far. Most people believe sales volumes will pick
up soon, but the question is how much can they pick up this
year?" said the Shanghai-based trader.
    On a positive note, RBC pointed out that Shanghai equities
may spur a rally in base metals in the near term as the Shanghai
composite index has been testing the highs seen in the
rally after Beijing unveiled a slew of infrastructure spending
programmes in September. 
    "Should [the Shanghai Composite Index] break through the
2,145 high, I think we can expect a follow-on rally in
commodities. Keep a close eye on this index over the next few
days," it said.
    Elsewhere, the Europe's debt crisis and their impact on
global demand is still putting investors on edge. 
    The euro zone's fiscal deficit fell sharply last year as
governments slashed expenses and raised taxes to regain market
confidence in their public finances, but public debt still
climbed, data from the European Union's statistics office showed
on Monday. 
    In industry news, Brazilian miner Vale said on
Monday it would close the Frood nickel and copper mine in Canada
by the end of the year to focus on more competitive reserves as
the century-old mine's resources become depleted and make it
less economical. 
  Base metals prices at 0702 GMT
  Metal              Last       Change   Pct Move YTD pct chg
  LME Cu            7920.75    -32.25     -0.41      4.22
  SHFE CU FUT JAN3    57280      -610     -1.05      2.97
  LME Alum          1953.00     -7.00     -0.36     -3.32
  SHFE AL FUT JAN3    15390       -60     -0.39     -2.84
  HG COPPER DEC2     360.25     -1.95     -0.54      4.85
  LME Zinc          1855.50     -0.50     -0.03      0.57
  SHFE ZN FUT JAN3    14785      -180     -1.20     -0.07
  LME Nickel       16510.00    -80.00     -0.48    -11.76
  LME Lead          2051.50    -15.50     -0.75      0.81
  SHFE PB FUT         15305      -215     -1.39      0.10
  LME Tin          20378.00    -92.00     -0.45      6.14
  LME/Shanghai arb     610
   Shanghai and COMEX contracts show most active months
   ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE 
 third month
 ($1 = 6.2547 Chinese yuan)

 (Reporting by Carrie Ho; Editing by Clarence Fernandez and
Robert Birsel)
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