October 14, 2011 / 9:23 AM / in 9 years

METALS-Copper hits 2-week top on China inflation optimism

* Copper posts 2nd weekly gain after China Sept CPI dips
    * US data, hopes for Europe resolution aid copper rally
    * Cerro Verde mine labor strife takes turn for worse
    * Coming up: G20 finance ministers meeting in Paris

    By Chris Kelly and Marie-Louise Gumuchian
    NEW YORK/LONDON, Oct 14 (Reuters) - Copper rallied to its priciest level in
more than two weeks on Friday, after Chinese economic data suggested Beijing's
year-long fight against high inflation may be gaining the upper hand.
    Stronger-than-expected retail sales data in the United States and growing
optimism for a resolution to Europe's debt crisis provided additional fuel to
the economically sensitive metal, which is now up more than 14 percent from a
2011 trough below $6,700 per tonne, hit two weeks ago.
    Copper continued to outperform other commodities this week, front-running a
wider recovery from the late-September rout that savaged most risk assets, as
Asian markets returned from holiday in a buying mood and supply-side threats
remained for a market already in a production deficit this year.
    "The markets are going to discount global recessionary fears, or
knock-backs in growth concerns, or what is happening in Europe ... particularly
copper," said Steve Shafer, who helps manage $300 million as chief investment
officer of Oklahoma City-based Covenant Investors.
    "Those are windows of opportunity to monetize the longer-term supply/demand
dynamic that the market decided to focus on today."
    London Metal Exchange (LME) three-month copper peaked at $7,580.25
per tonne, its highest since Sept. 27, before ending at $7,545, up $235 or 3.2
percent on the day.
    In New York, the key December COMEX contract shot up 10.15 cents or
3 percent to settle at $3.4085 per lb, after dealing from $3.3125 to $3.4315,
another high dating to late September.
    But as has been the case this week, volumes thinned as prices advanced.
Nearly 44,000 lots traded in New York, down almost 20 percent from the 30-day
norm, according to preliminary Thomson Reuters data.
    Traders were greeted on Friday with Chinese data showing consumer inflation
dipped to 6.1 percent in September, retreating further from a three-year peak
of 6.5 percent in July.
    "Any ease in their inflation is good because it reduces the threat of
Chinese rate action," said Frank Lesh, broker and futures analyst with Future
Path Trading in Chicago.
    Further support stemmed from the West, where hope grew for a resolution to
the European debt crisis and U.S. retail sales data surprised to the upside,
analysts said.
    "The focus is really on the sovereign debt situation in Europe," said
strategist Leon Westgate at Standard Bank. "I think until you get a bit more
clarity there, the metals will continue to trade quite technically."
    Copper continued to gain support from labor strife at the Cerro Verde mine
in Peru after news that talks between union officials and Freeport-McMoRan broke down on Friday.G20 MEETING
    G20 finance chiefs and central bank heads meeting in Paris on Friday
urgently need to find a convincing solution to the deepening euro zone debt
crisis, which has fanned fears of a global slide into recession.
    German Chancellor Angela Merkel and French President Nicolas Sarkozy late
last week said they would announce a plan to solve the crisis by the end of the
month.
    "The next really big issue is the so-called comprehensive plan from Merkel
and Sarkozy at the end of October. That is the big risk here," Danske Bank
analyst Arne Lohmann Rasmussen said. "The buyers could be disappointed if they
cannot deliver what they promised."
    Copper inventories at LME warehouses declined by 2,900 tonnes to 450,200
tonnes, latest data showed, about a third higher than levels seen last
December. 
    Copper inventories in warehouses monitored by the Shanghai Futures Exchange
rose 1.8 percent from Sept. 30, the exchange said on Friday. Aluminium stocks
rose 51.4 percent.
    The rise in aluminium stocks followed months of steady declines since the
start of the year, with inventories hitting an all-time low of around 77,000
tonnes on Sept. 30.
    Short-selling, a popular target in volatile and rumour-riddled markets, has
been blamed by aluminium producer Alcoa's chief executive for a big fall
in the price of the metal and with it the company's share price.
    Three-month aluminium was not traded on the kerb close but bid at
$2,220 from a close of $2,207 a tonne on Thursday.
 Metal Prices at 1813 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       341.75       11.05     +3.34     444.70    -23.15
 LME Alum      2220.00       13.00     +0.59    2470.00    -10.12
 LME Cu        7544.50      234.50     +3.21    9600.00    -21.41
 LME Lead      2026.00      -10.00     -0.49    2550.00    -20.55
 LME Nickel   18850.00      395.00     +2.14   24750.00    -23.84
 LME Tin      21800.00    -1200.00     -5.22   26900.00    -18.96
 LME Zinc      1931.00        7.50     +0.39    2454.00    -21.31
 SHFE Alu     16695.00       35.00     +0.21   16840.00     -0.86
 SHFE Cu*     56010.00     1130.00     +2.06   71850.00    -22.05
 SHFE Zin     15295.00      135.00     +0.89   19475.00    -21.46
** 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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