January 30, 2012 / 10:55 AM / in 8 years

METALS-Copper falls as EU debt woes dash demand hopes

* Investors watch for China's market re-entry
    * EU leaders grapple to reconcile austerity, growth
    * LME copper stocks fall to lowest since Sept 2009

    By Maytaal Angel	
    LONDON, Jan 30 (Reuters) - Copper fell on Monday, pulling back from a
four-month high as demand prospects dimmed amid a lack of progress in talks to
resolve Europe's debt crisis, tempting investors to cash in on January's rally.	
    Benchmark three-month copper on the London Metal Exchange closed at
$8,429 a tonne from $8,530 at the close on Friday, when it reached $8,679.50,
the highest since Sept. 16.   	
    Copper is headed for its biggest monthly gain since October, with an
increase of 10 percent.	
    European leaders struggled to reconcile austerity with growth at a summit
due to approve a permanent rescue fund for the euro zone and put finishing
touches to a German-driven pact for stricter budget discipline. 	
    "People are wondering whether there's much upside from here given there's
still slowing growth in China and the prospect of weak growth in Europe. It's
difficult to see how this rally can continue," said Jesper Dannesboe, senior
commodity strategist at Societe Generale.	
    In the wider markets, global equities were lower while the euro came off
six-week highs against the dollar, making dollar-priced metal costly for
European investors.  	
    Data from the eurozone showed confidence in the economy strengthened in
January for the first time since early 2011, but a recovery in Germany masked a
deterioration in France and Italy in a sign of the bloc's diverging fortunes.
 	
    In supply-side news, LME copper stocks continued to decline, dropping 2,300
tonnes to 333,125 - their lowest since September 2009, though stocks in Shanghai
rose ahead of China's new year break last week.	
    "Base metals' dramatic and bullish start to the year has taken many by
surprise," Barclays Capital said in a research note.	
    "While shifts in macro sentiment have been the predominant driver, another
supportive trend has been the surge across the majority of the complex in LME
cancelled warrants as a proportion of total stocks held in LME warehouses."	
    Cancelled warrants, or material earmarked for delivery, stand at an average
level of 15 percent of total LME inventories, versus a 5-year average just below
5 percent.	
    This is telling the market that inventories are going to be withdrawn on a
significant scale from LME-monitored warehouses in the near term, BarCap said.	
    Stock withdrawals can indicate real demand, or a tactical redistribution
redistribution of material between warehouses, BarCap said. 	
                    	
    CHINA	
    "As China returns to the market, the sustainability of the new loftier price
levels will become visible. In this context, domestic metal stockpiles, which
have risen recently, will be an important indicator to watch in the weeks
ahead," said Credit Suisse in a note.	
    But Citigroup analyst David Wilson said he believed China had already
restocked, fabrication rates had fallen quite sharply over the last quarter and
premiums were down.	
    "It's difficult to see what would cause Chinese traders to buy copper. That
would be a complete break from the buying behavior we saw throughout the whole
of the second half of last year," Wilson said.	
    Tin closed at $23,975 a tonne from $24,400, though LME stocks fell
50 tonnes to 9,315, their lowest point since March 2009.	
    Zinc closed at $2,124 a tonne from $2,150, and lead at
$2,265 a tonne from $2,295. Aluminium closed at $2,279 a tonne from
$2,265, and nickel at $21,305 a tonne from $21,700.	
    Russia's Norilsk Nickel, the world's largest producer of nickel
and palladium, said it may see a modest recovery in nickel output this year,
while palladium, platinum and copper could continue to decline. 	
    	
 Metal Prices at 1707 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       382.55       -6.35     -1.63     444.70    -13.98
  LME Alum      2274.00        9.00     +0.40    2470.00     -7.94
  LME Cu        8416.25     -113.75     -1.33    9600.00    -12.33
  LME Lead      2270.75      -24.25     -1.06    2550.00    -10.95
  LME Nickel   21303.00     -397.00     -1.83   24750.00    -13.93
  LME Tin      23950.00     -450.00     -1.84   26900.00    -10.97
  LME Zinc      2118.00      -32.00     -1.49    2454.00    -13.69
  SHFE Alu     16275.00     -120.00     -0.73   16840.00     -3.36
  SHFE Cu*     60320.00     -400.00     -0.66   71850.00    -16.05
  SHFE Zin     15940.00       85.00     +0.54   19475.00    -18.15
 ** 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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