RTRS:METALS-Copper snaps 3-day rise on dollar, EU caution
* Euro hits 3-week low vs dollar ahead of EU summit
* LME copper down nearly 13 pct in Q2
* Shanghai aluminium rebounds 2 pct, subsidy seen brief
(Adds comment, detail, updates prices)
By Carrie Ho
SHANGHAI, June 28 (Reuters) - London copper slipped on
Thursday, snapping three days of gains, as the dollar firmed and
investors exercised caution ahead of a European leaders' summit
aimed at resolving the region's debt crisis.
Copper is down nearly 13 percent for the quarter, and is on
track to stretch its monthly losing streak to a fourth month in
June, as the global economy struggles largely because of
Europe's debt crisis.
A stronger dollar, which makes dollar-denominated
commodities like copper more costly for holders of other
currencies, weighed on the metal. Copper rose earlier on upbeat
U.S. data showing orders for durable U.S. manufactured goods
rebounded more than expected in May and pending home sales rose
the most since October.
Three-month copper on the London Metal Exchange
dropped 0.4 percent to $7,375.50 per tonne by 0805 GMT.
The most-active October copper contract on the Shanghai
Futures Exchange gained 0.9 percent to close at 54,200
yuan ($8,500) per tonne.
Copper is trapped in narrow ranges due to longer-term worry
about the global economy and with demand from top consumer China
still largely sluggish, said a Shanghai-based trader.
Copper faces resistance at around $7,500 and will see
support at $7,250 to $7,300, the trader said.
But market players said they were seeing more copper
drawdowns from Chinese bonded warehouses due to cheaper prices
and an improved LME-Shanghai arbitrage, with LME three-month
copper trading at a premium of 369 yuan on Thursday, well below
the nearly 4,000 yuan in early May.
Traders said they were watching the arbitrage window closely
and were poised to import more copper into China as soon as LME
copper starts trading at a discount to Shanghai copper.
"The narrowing of the LME-ShFE arbitrage has been
encouraging buyers to draw copper from bonded warehouses. Once
the arbitrage window opens, we will see more people importing as
well," said a Shanghai-based physical trader.
"Although the business of copper consumers is still
sluggish, people would restock a bit or enter into financing
deals whenever prices and the arbitrage are in their favour."
SHANGHAI ALUMINIUM REBOUNDS
But all eyes are on the two-day E.U. summit, which starts
later on Thursday.
German Chancellor Angela Merkel brushed aside increasingly
shrill calls from Spain and Italy on Wednesday for emergency
action to lower their soaring borrowing costs, dashing any hopes
of European leaders coming up with substantive solutions by the
end of the summit.
Shanghai aluminium futures rebounded 2 percent
after falling around 3 percent over the past two sessions after
Henan, China's top aluminium-producing province, cut the
electricity fees of smelters in a bid to revive output.
"I think the market had over reacted to the aluminium issue.
Getting 1,000 yuan a tonne of discount is not going to help the
high-cost aluminium smelters in Henan much. And there are
rumours that this policy is just temporary," said an executive
with a private aluminium smelter.
Henan province, which accounts for about 20 percent of
China's total aluminium production capacity, has cut power
prices to aluminium smelters by 0.08 yuan per kilowatt hour,
which will trim production cost for smelters by about 1,000 yuan
per tonne.
Some sources say the subsidies are a temporary measure by
the Henan government and that the allowances may be claimed back
when smelters return to profit.
"I don't think this will increase China's overall aluminium
supply by much, as the subsidy amount is very small," said
another private smelter source.
Base metals prices at 0805 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7375.50 -29.50 -0.40 -2.95
SHFE CU FUT OCT2 54200 460 +0.86 -2.10
HG COPPER JUL2 332.65 -2.30 -0.69 -3.19
LME Alum 1878.50 6.50 +0.35 -7.00
SHFE AL FUT OCT2 15360 300 +1.99 -3.06
LME Zinc 1778.25 22.25 +1.27 -3.62
SHFE ZN FUT OCT2 14350 105 +0.74 -3.01
LME Nickel 16260.00 10.00 +0.06 -13.09
LME Lead 1771.00 11.00 +0.63 -12.97
SHFE PB FUT 14495.00 110.00 +0.76 -5.17
LME Tin 18630.00 -70.00 -0.37 -2.97
LME/Shanghai arb^ 369
Shanghai and COMEX contracts show most active months
^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month
