RTRS:METALS-Copper struggles as economic woes drag
* Weaker euro zone economy, China factory activity
* Shanghai copper stockpiles seen rising further
* Coming Up: U.S. new home sales, 1500 GMT
(Adds comments, updates prices)
By Manolo Serapio Jr
SINGAPORE, Feb 24 (Reuters) - London copper erased
early gains to trade weaker for a third session on Friday as a
fragile global economy injected caution into the market,
although the modest losses meant the metal is still headed for
its best weekly showing in a month.
Copper is one of the best performing commodities so far this
year having gained more than 10 percent, although investors are
finding fewer reasons to stretch the rally with the European
economy heading back into recession and manufacturing activity
in top copper user China continuing to shrink.
Three-month copper on the London Metal Exchange
slipped 0.1 percent to $8,379.75 a tonne by 0456 GMT.
Despite the drop, copper is still up 2.5 percent for the
week so far, its biggest gain since the last week of January,
after rallying on Tuesday, along with other commodities, after
Greece secured its second bailout package.
"Technically, most markets have now positive technical
momentum ratings but longer-term trend indicators have remained
largely neutral so far," Credit Suisse said in a note.
"This implies that the price path is likely to be bumpy with
occasional setbacks likely on the way up."
While Chinese physical buying interest for copper has been
largely slack since after the Lunar New Year break in January,
China's demand will likely stay firm this year, particularly
because of its electrification project which comprises about 40
percent of domestic copper consumption.
"This will buttress demand in the event of a downturn
because it's a cyclical state investment plan in China that
transcends the short-term economic cycle," said Matt Fusarelli,
analyst at AME Group.
"If the world were looking at weaker circumstances, we think
copper will hold up better because of this."
The most-traded May copper contract on the Shanghai Futures
Exchange fell 1.1 percent to 59,780 yuan ($9,500) a
tonne.
SHANGHAI COPPER STOCKS MAY RISE AGAIN
The euro zone economy is heading into its second recession
in just three years and the wider European Union will stagnate,
the EU's executive said, warning that the currency area has yet
to break its vicious cycle of debt.
The weaker outlook in European and Chinese manufacturing
activity cut short copper's rally earlier in the week.
But traders said the fact that losses had been modest meant
there is underlying strength in the market, which could be well
spurred by any sign of pickup in Chinese demand.
Underscoring weak Chinese physical demand, stocks in
Shanghai warehouses hit their highest level in nearly a decade
last week and traders expect the number to increase further this
week.
One Shanghai-based trader was predicting another rise of
14,000 tonnes in stockpiles that would bring it to more than
230,000 tonnes CU-STX-SGH.
Elsewhere, intimidation and violence by some workers against
others who did not take part in last year's three-month strike
at Freeport-McMoRan Copper & Gold Inc's vast Grasberg
gold mine have interrupted resumption of normal operations, the
company said.
Base metals prices at 0456 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 8379.75 -10.25 -0.12 10.26
SHFE CU FUT MAY2 59780 -640 -1.06 7.98
HG COPPER MAR2 380.30 -0.30 -0.08 10.68
LME Alum 2277.00 4.00 +0.18 12.72
SHFE AL FUT MAY2 16185 -40 -0.25 2.15
LME Zinc 2055.00 7.00 +0.34 11.38
SHFE ZN FUT MAY2 15825 -40 -0.25 6.96
LME Nickel 20035.00 35.00 +0.18 7.08
LME Lead 2159.50 -5.50 -0.25 6.12
SHFE PB FUT 15985.00 85.00 +0.53 4.58
LME Tin 24010.00 -185.00 -0.76 25.05
LME/Shanghai arb^ 1965
Shanghai and COMEX contracts show most active months
^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month
