October 17, 2011 / 10:49 AM / 9 years ago

METALS-Copper erases gains, German remarks dent optimism

* German FinMin sees no definitive solution at Oct. 23 EU summit
    * Freeport halts output at Grasberg, No. 2 copper mine

    By Melanie Burton and Alessandra  Prentice	
    LONDON, Oct 17 (Reuters) - Copper fell from a three-week high on Monday,
erasing earlier gains as investors shunned risk after Germany's Finance Minister
said the upcoming European Union summit would not definitively solve the
region's debt crisis.	
    Three-month copper on the London Metal Exchange (LME) closed at
$7,495 a tonne versus Friday's close at $7,545 a tonne. 	
    It had earlier hit its highest in three weeks at $7,660 a tonne, a rebound
of more than 15 percent from a 2011 trough of $6,635 hit earlier this month. 	
    G20 finance ministers and central bankers said at a meeting in Paris at the
weekend that they expected euro zone leaders to "decisively address the current
challenges through a comprehensive plan" at a European Union summit on Oct. 23.
  	
    But European shares fell after German Finance Minister Wolfgang Schaeuble
played down hopes of a definitive solution to the debt crisis at the coming EU
summit. The index had hit a 10-week high earlier in the session on optimism that
policymakers were acting to tackle the crisis. 	
    "Copper did very well earlier today due to hopes that some solution would be
made evident soon. That bullishness has turned sour on later remarks that it
wouldn't be that simple," VM Group analyst Carl Firman said.
    "You are going to see a lot of volatility in the markets across all asset
classes over the next few weeks until something is put on the table that will
convince markets that the crisis in the EU will be dealt with."	
    The euro also fell against the dollar. A stronger dollar makes commodities
like metals more expensive for holders of other currencies. 	
    In the United States, a gauge of manufacturing in New York State contracted
for the fifth month in a row in October as new orders were flat and the outlook
for the coming months weakened, the New York Federal Reserve said in a report.
 	
    U.S. industrial production rose 0.2 percent in September, in line with
expectations, as a gain in manufacturing offset a drop in utility output, a
Federal Reserve report showed. 	
  	
   SUPPLY KINKS	
   Freeport McMoRan Copper & Gold Inc halted copper and gold production
on Monday at its giant Grasberg mine in Indonesia because of security fears and
worker blockades, in the worst supply disruption since a strike began a month
ago.   	
    Also, a Peruvian union on Friday pulled out of talks with the U.S. miner,
while members threatened to go on a hunger strike to press demands for a pay
hike. 	
    The roughly 20 million tonne copper market is expected to be in a
670,000-tonne deficit this year, according to a poll of 24 analysts compiled by
Reuters in July. 	
    Global miner Rio Tinto   signalled a major retreat from its
aluminium business on Monday, only four years after buying aluminium giant Alcan
for $38 billion.	
    	
    Aluminium closed at $2,217 a tonne from a last bid of $2,220 on
Friday. Three-month tin closed at $21,495 a tonne from $21,800. It
earlier hit $21,000, it's lowest price in 11 days.	
    "Fundamentally the price should probably be stronger," said Macquarie in a
note. "Although demand growth has slowed and supply has been rising, the market
remains in a deficit that, relative to market size, is the largest among the LME
traded base metals and belies the recent sharp sell-off in the tin price."	
     Zinc , used in galvanizing, closed at $1,903 a tonne from $1,930 on
Friday's close. Battery material lead closed at $1,986 a tonne from
$2,026. A lack of immediately available supply -- despite LME stocks at record
levels -- continued to be reflected in prices for so-called tomorrow-next day
delivery, which traded at a $5 backwardation or premium earlier. 
    Nickel closed at $18,995 a tonne from $18,875.	
    Investors will also keep an eye out this week for industrial production data
from China on Tuesday. 	
    "Analysts are expecting Chinese gross domestic product increased 9.3 pct
year over year, giving evidence that the market may not be as pessimistic on
Chinese growth as had been expected," said RBC Capital in a note.	
    "The actual report is due out tomorrow, so expect day-end position squaring
by short-term accounts before the close."	
      	
 Metal Prices at 1614 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       338.50       -2.05     -0.60     444.70    -23.88
  LME Alum      2210.25        3.25     +0.15    2470.00    -10.52
  LME Cu        7467.00      -78.00     -1.03    9600.00    -22.22
  LME Lead      1967.75      -58.25     -2.88    2550.00    -22.83
  LME Nickel   18875.00        0.00     +0.00   24750.00    -23.74
  LME Tin      21202.00     -598.00     -2.74   26900.00    -21.18
  LME Zinc      1898.00      -32.00     -1.66    2454.00    -22.66
  SHFE Alu     16575.00      -25.00     -0.15   16840.00     -1.57
  SHFE Cu*     55830.00     -120.00     -0.21   71850.00    -22.30
  SHFE Zin     15260.00      -60.00     -0.39   19475.00    -21.64
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
0 : 0
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