RTRS:METALS-Copper rises to near 4-mth high after U.S. debt deal
LONDON, August 1 (Reuters) - Copper rose to its highest in almost four
months as a continued strike at the world's largest mine enhanced concerns over
supply, while leaders in the U.S. Congress agreed a deal to raise U.S.
borrowing, easing worries of debt default.
Benchmark copper on the London Metal Exchange rose 0.5 percent to
$9,880 a tonne by 0913 GMT, up from a close of $9,820 a tonne on Friday.
Earlier, the metal used in power and construction hit its highest in almost
four months at $9,905 per tonne.
President Barack Obama announced on Sunday that Democrat and Republican
leaders have reached an agreement to reduce the U.S. deficit and avoid default.
This prompted investors to unwind safe haven positions and bet on assets,
such as base metals, perceived as riskier.
"The tentative deal to raise the debt ceiling in the U.S., plus no
resolution of the Escondida strikes, plus a 24-hour strike at Collahuasi: there
is a lot going on supporting copper and other metals," said Credit Agricole
analyst Robin Bhar.
"Investors are looking to hedge economic uncertainties by betting on
tangible assets; they want exposure to emerging economies and they are looking
for an inflation hedge."
Investor focus shifted back to copper supply constraints.
Workers at the world's No. 3 copper mine, Chile's Collahuasi, returned on
Sunday after a 24-hour walkout but a strike at Escondida, the world's largest
copper mine, stretched on for a 10th day.
In a Reuters poll last month, a consensus of analysts forecast a 343,150
tonnes deficit for copper this year but recent strikes at the Chilean mines are
likely to have exacerbated the tightness.
Capping gains, the market was digesting Friday's data showing
softer-than-expected U.S. economic growth.
The U.S. economy stumbled badly in the first half of 2011 and came
dangerously close to contracting in the January-March period, raising the risk
of a recession if a standoff over the nation's debt does not end quickly.
Investors were now focusing on U.S. manufacturing data, which will be
released by 1400 GMT
INVENTORIES DECLINE
Inventories of copper in LME-registered warehouses fell 525 tonnes to
466,025 tonnes but remained more than a third higher than in mid-December last
year.
High inventory levels in the last few months raised concerns over continued
demand weakness in China, but some analysts argue that Chinese buyers, who have
been tapping into their inventories in the first half of the year, will have to
increase copper imports soon.
"We believe investors were also mindful that cancelled warrants among most
LME metals are currently above long-term averages, signaling inventory levels
are likely to decline in the coming weeks, in part from resilient demand,"
Morgan Stanley said in a note.
Other base metals such as aluminium, tin, zinc and lead were showing healthy
price increases on Monday, rising by 1-2 percent from the close on Friday.
"They all had good technical break outs and now we are targeting higher
levels," Bhar said.
"If we go above certain (price) levels we could see some of the big funds
coming into the market again."
Positive fundamentals were also supporting prices.
Boosting aluminium, smelters in Henan province, China's top producer of the
metal, face electricity supply cuts that could hit output at a time of high
domestic prices if summer power demand continues to surge, industry sources said
on Friday.
Expectations of a narrowing surplus in the second half of the year,
increased stainless steel production and technical buying were boosting nickel
pricing, RBC said in a note.
Aluminium was trading at $2,652.75 from $2,624 while nickel
was at $25,106 from $24,995.
Tin was at $28,675 from $28,100 while zinc , used in
galvanizing was at $2,519.75 from $2,490 Friday's close.
Battery material lead was at $2,651.25 from $2,613.
Metal Prices at 0917 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 449.85 1.90 +0.42 444.70 1.16
LME Alum 2635.00 11.00 +0.42 2470.00 6.68
LME Cu 9750.00 -70.00 -0.71 9600.00 1.56
LME Lead 2722.00 109.00 +4.17 2550.00 6.75
LME Nickel 24100.00 -895.00 -3.58 24750.00 -2.63
LME Tin 28095.00 -5.00 -0.02 26900.00 4.44
LME Zinc 2517.00 27.00 +1.08 2454.00 2.57
SHFE Alu 18535.00 255.00 +1.39 16840.00 10.07
SHFE Cu* 73440.00 780.00 +1.07 71850.00 2.21
SHFE Zin 18915.00 180.00 +0.96 19475.00 -2.88
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
