October 21, 2011 / 10:40 AM / 9 years ago

METALS-Volatile copper roars back in front of EU summit

* Copper bounces back from Thursday rout
    * European summit optimism sparks recovery
    * Chinese copper buying interest perks up
    * Coming up: European Union debt-crisis summit

    By Chris Kelly and Pratima Desai
    NEW YORK/LONDON, Oct 21 (Reuters) - Copper ended a volatile
week on firmer footing Friday, rallying 6 percent in its
largest one-day advance since early 2010, as opportunistic
buyers stepped up purchases on the eve of a European Union
debt-crisis summit.
    A day removed from its worst one-day collapse in four
weeks, copper bounced back strongly to lead all gainers in the
Reuters-Jefferies CRB index , as investors grew hopeful
for a near-term solution to the euro zone debt crisis. The
metal was also helped by Chinese buying signals.
    Gains spanned the entire base metals complex. Aluminium tacked on 4 percent, zinc jumped nearly 5
percent, lead was up more than 6 percent, tin 
better than 4 percent, and nickel over 5 percent.
    "Yesterday was very odd," said Edward Meir, commodity
analyst at MF Global. "(Copper) just collapsed and we weren't
seeing any weakness in anything else. I think people may have
thought it got a bit overdone yesterday.
    "The metals are under a two-track attack: One from the debt
crisis and one as equally important, China. That is weighing
much more heavily, especially on copper," he said.
    London Metal Exchange (LME) benchmark copper shot
up by $410 or 6 percent to end at $7,145 per tonne -- its best
one-day performance on a percentage basis since Feb. 11, 2010.
    In New York, the key December COMEX contract surged
by 16.55 cents or 5.4 percent to settle at $3.2230 per lb, near
the upper end of its $3.0770 to $3.2405 session range.
    Despite the magnitude of the price rally, volumes were not
as strong. A little more than 55,000 lots traded in New York,
largely in line with the 30-day average, according to
preliminary Thomson Reuters data.
    Copper and the industrial metals have been whipsawed in
recent days by a lack of clarity surrounding Europe's ability
to get its debt problems under control.
    France's push to use more European Central Bank money to
fight the euro zone debt crisis ran into strong resistance from
Germany and other EU partners ahead of two meetings on Sunday
and Wednesday.
    "If they don't come up with something credible by either
Sunday or Wednesday, we are really in deep trouble in all of
these markets," Meir went on to say.
    "People are expecting so much. This whole rally over the
last two to three weeks has been in anticipation that they will
come up with something. If they fall short, all bets are off
    Traders said many short copper positions -- bets on lower
prices -- taken on Thursday were being squared ahead of the
weekend meeting and this explained in part why copper was
showing gains.
    "Anybody who is long is either crazy or has information
that I don't have," a metals trader said. "I'm waiting for the
results of the pillow fight between France and Germany."SPLIT ON CHINA
    A plus for the bulls was the volume of copper stocks in
LME-approved warehouses  . More
than 3,000 tonnes were set for withdrawal on Thursday, leaving
total inventory levels at 447,800 tonnes -- down nearly 6
percent since early October.
    Traders say much of this metal has gone to China, whose
copper appetite accounts for about 40 percent of the world's
demand, and that there are more deliveries in the pipeline to
the world's largest consumer of industrial metals.
    "Chinese consumers are showing a lot of interest," the
metals trader said. "There's a lot more to come."
    That interest can be seen in the high level of canceled
warrants -- material tagged for delivery -- in LME-approved
warehouses located in South Korea. About 20,000 tonnes of metal
is earmarked to leave warehouses in Busan and Gwangyang.
    But some negative sentiment is based on the premise that
much of the metal consumed in China is actually exported in the
form of copper products to the United States and Europe.
 Metal Prices at 1612 GMT
 COMEX copper in cents/lb, LME prices in $/T and SHFE prices in
 Metal Prices at 1810 GMT
Metal        Last      Change  Pct Move   End 2010   Ytd Pct
 COMEX Cu     322.50    16.75     +5.48     444.70    -27.48
 LME Alum    2125.00    40.00     +1.92    2470.00    -13.97
 LME Cu      7145.00   410.00     +6.09    9600.00    -25.57
 LME Lead    1915.00   125.00     +6.98    2550.00    -24.90
 LME Nickel 18800.00   775.00     +4.30   24750.00    -24.04
 LME Tin    21670.00   470.00     +2.22   26900.00    -19.44
 LME Zinc    1805.00    65.00     +3.74    2454.00    -26.45
 SHFE Alu   16165.00   125.00     +0.78   16840.00     -4.01
 SHFE Cu*   51670.00   720.00     +1.41   71850.00    -28.09
 SHFE Zin   14300.00   450.00     +3.25   19475.00    -26.57
** 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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