December 1, 2011 / 12:18 PM / 8 years ago

METALS-Copper drops 1 pct on China slowdown fears

* Copper hit by stalling global factory activity
    * Tin biggest loser among base metals
    * Aluminium bucks trend; rises as funds pile in
    * Coming up: U.S. monthly jobs report on Friday

    By Chris Kelly and Susan Thomas
    NEW YORK/LONDON, Dec 1 (Reuters) - Copper shed more than 1
percent on Thursday, pressured by poor Chinese manufacturing
data that fed fears about sluggish demand prospects from the
world's top red metal buyer.
    The weaker-than-expected Chinese factory data, as well as
fresh signs of economic slowing in Europe stole the spotlight
on Thursday, triggering a profit-taking reversal from
Wednesday's exuberance, which saw copper rally over 5 percent
to its priciest in four weeks after global central banks moved
to provide needed liquidity to the financial system.
    "After such a sharp move on what (the central bank action)
was basically an item out of the blue, you're always going to
get profit taking," said Stephen Briggs, analyst at BNP
    "Also people are thinking this is positive but in itself it
doesn't solve the euro zone problem."
    London Metal Exchange (LME) benchmark three-month copper dropped $95 or 1.2 percent to end at $7,790 per tonne,
pulling back from a four-week high at $8,000 on Wednesday when
trade volumes surged to almost double the 50-day moving
average, amplified by short covering.
    In New York, the newly active March COMEX contract 
fell 4.15 cents to settle at $3.5340 per lb, closer to the
bottom of its $3.5175 to $3.5995 session range.
    Futures volumes slowed in late New York business to just
over 42,000 lots, about a third below the 30-day average,
according to preliminary Thomson Reuters data.
    Losses gathered steam from overnight business after data
showed China's factory sector shrank in November for the first
time in nearly three years, an official purchasing managers'
index showed on Thursday. The data came one day after Beijing
cut banks' reserve requirements to shore up the economy.
    "That move came earlier, and was more substantive than we
had anticipated," said Duncan Hobbs, senior commodities and
mining analyst at Macquarie.
    "Our concern was what was it that the Chinese authorities
can see that markets as a whole cannot yet see. That was
unveiled today with the PMI data, that's the key driver behind
today's market retreat."EUROPEAN CONTRACTION
    Manufacturing activity also contracted across much of
Europe, shrinking even further in the euro zone and reinforcing
the view that the debt-strapped region is in recession. British
manufacturing contracted at the fastest pace in two years.
    "It's all pointing to contraction," said Bart Melek, head
commodity strategist with TD Bank Financial Group.
    "Longer term, Europe is most likely in a recession, China
is slowing down because of construction and now manufacturing.
I would not expect a lot of upside for base metals, or copper
in particular."
    One manufacturing bright spot came from the United States,
where the pace of activity unexpectedly picked up in November
to its strongest rate since June, and new orders surged.
    Tin was the biggest loser among the base metals on Thursday
after breakaway Indonesian smelters shipped metal in
contravention of the industry's self-imposed ban on shipments
from the world's top exporter.
    Three-month tin closed down $800 or 3.8 percent at
$20,100 per tonne.
    "The ITA's tin export moratorium is now looking
increasingly fragile and a normalization of the Indonesian
export flow before the year end is becoming more likely,"
Credit Suisse said in a note.
    Bucking the trend, aluminium closed up $35 at
$2,145 per tonne as funds piled into the metal at the start of
the month on the view that it is cheaply valued relative to its
peers. The fund buys caused shorts to cover, traders said.
    Aluminium is trading below many producers break-even
levels, leading many analyst to forecast production cuts. Norsk
Hydro said earlier this month that it would not
restart idled capacity at its Sunndal smelter in Norway until
conditions picked up.
 Metal Prices at 1857 GMT
 COMEX copper in cents/lb, LME prices in $/T and SHFE prices in
 Metal            Last      Change  Pct Move   End 2010   Ytd
 COMEX Cu       354.55       -3.00     -0.84     444.70  
 LME Alum      2144.00       34.00     +1.61    2470.00  
 LME Cu        7789.00      -96.00     -1.22    9600.00  
 LME Lead      2104.50       -5.50     -0.26    2550.00  
 LME Nickel   16745.00     -755.00     -4.31   24750.00  
 LME Tin      20100.00     -800.00     -3.83   26900.00  
 LME Zinc      2044.50      -27.50     -1.33    2454.00  
 SHFE Alu     16195.00      360.00     +2.27   16840.00   
 SHFE Cu*     57960.00     3400.00     +6.23   71850.00  
 SHFE Zin     15800.00      685.00     +4.53   19475.00  
** 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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