Tue Dec 6, 2011 2:39pm EST
* Copper off over 1 pct as euro zone worries persist
* “Greater downside risks” for Asian economies adds weight
* Markets cautious ahead of EU summit, ECB meeting
* Coming up: German Oct industrial output on Wednesday
By Chris Kelly and Susan Thomas
NEW YORK/LONDON, Dec 6 (Reuters) – Copper fell over 1 percent on Tuesday, hit by Standard and Poor’s recent downgrade warning for the euro zone and fears Chinese growth could slow further, limiting demand prospects from the world’s top metals buyer. Down for the first time in three days, copper fell in tandem with other risk assets like global equities and the euro, after Standard & Poor’s warned late on Monday it could cut credit ratings of 15 euro zone countries, including the top-tier ratings of Germany and France, the region’s two largest economies.
Further pressure in the red metal stemmed from a warning about emerging East Asian economic growth, fanning worries that China’s near 40-percent intake of global copper demand could ease if economic conditions deteriorate. “It’s a question mark about the outcomes in Europe and in China,” said Adam Sarhan, chief executive of Sarhan Capital. “Regarding China, we’re continuing to dance back and forth between whether or not they have a hard landing or a soft landing.”
London Metal Exchange (LME) three-month copper shed $105, or 1.3 percent, to end at $7,835 per tonne. Open interest grew over 5,700 lots to 298,590 lots on Monday — its highest level since April. In New York, the key March COMEX contract fell by 4 cents to settle at $3.5755 per lb, after dealing between $3.5250 and $3.5830. Futures volumes remained on the light side at the start of the week. A little more than 40,000 lots traded late in New York – a third below the 30-day norm, according to preliminary Thomson Reuters Data.
Technically, copper’s price behavior was “semi-constructive”, analysts said, consolidating in the upper end of the range from last Wednesday’s breakout. Copper has fallen more than 20 percent from a record high of $10,190 per tonne and $4.60 per lb in February, but has risen almost 18 percent since late October. It rose nearly 10 percent last week. “Copper is slightly down because of the S&P threat to downgrade euro zone countries and because of little traction on equity markets, but the sentiment is still cautiously optimistic,” said Andrey Kryuchenkov, an analyst at VTB Capital.
A summit of EU leaders will try to put together a convincing agreement on Friday. The S&P warning hurt the euro, but the currency recovered after a surprise jump in German industrial orders. The dollar gave up most of its earlier gains but remained in positive territory against a basket of currencies . A stronger dollar makes commodities more expensive for holders of other currencies.
“Until we see a structural solution for the euro zone debt problem, we will not change our bearish view on metals,” said Gianclaudio Torlizzi, a partner at metals consultancy T-Commodity. “But we are flexible. The situation is very fluid, and can change from one day to the next.”ASIAN RISK
The ADB said in its Asian Economic Monitor that Emerging East Asia’s economic momentum remained robust, but the region faced greater risks than just three months ago as Europe’s debt problems and the fragile U.S. economy could worsen into another global crisis.
“We are still in an economic slowdown and latest economic data from the U.S. such as factory orders were weaker than expected,” Credit Suisse said in a note. “We also think that the $8,000 mark for copper will be difficult to break.” Three-month tin , was untraded at the close but was last bid at $20,300 per tonne up from $19,900 at the close on Monday. But the metal is still down around 40 percent since a record high $33,600 hit in April. Smelters in Indonesia’s main tin-producing region of Bangka island stopped shipments from Oct. 1 in a self-imposed bid to push benchmark tin prices above $23,000 a tonne. But some smelters started to flout the ban last week.
Tin stocks rose 230 tonnes to 12,395, and tightness in the market has been eroding since last week. Canceled warrants, or metal earmarked for delivery, have almost halved to 11 percent from 20 percent last week.
Metal Prices at 1920 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
COMEX Cu 357.50 -4.05 -1.12 444.70 -19.61
LME Alum 2112.00 -18.00 -0.85 2470.00 -14.49
LME Cu 7834.00 -106.00 -1.34 9600.00 -18.40
LME Lead 2125.00 5.00 +0.24 2550.00 -16.67
LME Nickel 18400.00 -105.00 -0.57 24750.00 -25.66
LME Tin 20300.00 400.00 +2.01 26900.00 -24.54
LME Zinc 2044.00 4.00 +0.20 2454.00 -16.71
SHFE Alu 16170.00 -50.00 -0.31 16840.00 -3.98
SHFE Cu* 57670.00 -290.00 -0.50 71850.00 -19.74
SHFE Zin 15670.00 -45.00 -0.29 19475.00 -19.54
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07