METALS-Copper highest in more than 2 weeks, demand eyed

Thu Apr 26, 2012 6:56am EDT

* Euro rebounds vs dollar after Federal Reserve statement
    * Premium of cash copper to 3-month contract at $103
    * Coming up: U.S. weekly jobless claims at 1230 GMT

   
    LONDON, April 26 (Reuters) - Copper prices rose to their highest level in
more than two weeks on Thursday, lifted by a stronger euro and tight supplies of
the metal, but worries about demand from top consumer China kept further gains
in check. 
    Benchmark copper on the London Metal Exchange (LME) rose to
$8,252.25 a tonne at 1041 GMT, up 0.6 percent from a close of $8,205 on
Wednesday. It earlier hit its highest level since April 10 at $8,265 a tonne. 
    Copper extended gains from the previous session, during which the U.S.
Federal Reserve offered a brighter economic outlook and said it was ready to
launch another round of bond buying if the U.S. economy weakens.  
    The comments helped the dollar fall against the euro and reach a three-week
low against a basket of major currencies. A weak dollar makes commodities priced
in the U.S. unit cheaper for holders of other currencies.   
    Quantitative easing raises the outlook for inflation and helps increase
asset prices. Economists at most major Wall Street firms say there is a less
than a 30 percent chance the Fed will undertake another massive round of
monetary stimulus, a Reuters poll showed.  
    "We see some confidence about the economy coming back to the market, and
that is supporting the euro and supporting the base metals, which have been
retreating recently," Eugen Weinberg, an analyst at Commerzbank, said.  
    In the physical copper market, the premium in cash copper to three-month
copper prices rose to $103, nearing the $114 level hit last week, its highest
since August 2008.  
    The tightness in the spot market was also reflected in an eight-year high in
the ratio of cancelled warrants to total LME stocks at 42.32 percent, while the
total stockpile is near its lowest level since late 2008.   
    "Cancelled warrants are at multi-year highs, and this is pointing to more
outflows in the coming weeks and months and that is again helping the copper
market," Weinberg said.  
    Some traders and analysts say the situation was caused by an artificial
supply squeeze as some large trading houses held dominant positions on the LME.
  
    The Shanghai copper curve flipped back into a small contango from
backwardation in the previous session. A backwardation generally suggests
reduced supply availability or increased near-term demand.  
     "The views on price moves are very contradictory, and that's why you see
rather high open interest in Shanghai. People who look at fundamentals believe
that prices should head south, while those who think the short squeeze will
continue expect prices to rise," said a Shanghai-based trader. 
     
 
    RISK SENTIMENT IMPROVES 
    The metal, used in power and construction, gained about 11 percent in the
first quarter and then has lost more than 2 percent this month under the weight
of large stockpiles in Shanghai and worries over weaker demand from China, which
consumed about 40 percent of the global supply last year.  
    Copper traded held above its 100-day moving average of $8,086.80 and broke
through its 200-day moving average at $8,224.89, a level below which it has been
trading for more than two weeks. 
    "We expect the base metal complex to trade sideways to higher as recent
attempts to make new yearly lows have failed. Momentum indicators have turned
positive, albeit from depressed levels, which should leave the market open to
near term bouts of short-covering rallies," RBS analysts said in a note.  
    "Overall we do not see the markets straying too far out of recent trading
ranges."  
    Strong corporate profits emerging on both sides of the Atlantic also
supported risk sentiment, but investors were cautious before a key test of
demand for euro zone debt on Friday when Italy sells new bonds.  
    Euro zone economic sentiment fell more than expected in April, driven by
more pessimistic industry and services sectors, European Commission data showed
on Thursday, as the economy sinks into recession.  
    In other metals, aluminium rose to $2,075.25 from Wednesday's close
of $2,075, while zinc, used to galvanize steel, was at $2,017 from
$2,005.50. Battery material lead rose to $2,103.25 from $2,091.  
    Tin rose to $22,250 from $21,925 while nickel climbed to
$17,897 from $17,605. 
     
 Metal Prices at 1044 GMT
 Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       372.75        2.75     +0.74     344.75      8.12
  LME Alum      2075.00        0.00     +0.00    2020.00      2.72
  LME Cu        8252.50       47.50     +0.58    7600.00      8.59
  LME Lead      2104.00       13.00     +0.62    2034.00      3.44
  LME Nickel   17878.00      273.00     +1.55   18650.00     -4.14
  LME Tin      22200.00      275.00     +1.25   19200.00     15.63
  LME Zinc      2015.75       10.25     +0.51    1845.00      9.25
  SHFE Alu     16180.00       35.00     +0.22   15845.00      2.11
  SHFE Cu*     58290.00      700.00     +1.22   55360.00      5.29
  SHFE Zin     15595.00       95.00     +0.61   14795.00      5.41
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN