Copper steadies

London Metal Exchange copper prices closed almost steady on Friday with a weak dollar helping to keep at bay fears of contagion from the eurozone debt crisis, although the metal notched up a third consecutive week of losses. Benchmark copper on the London Metal Exchange (LME) closed at $7,525 a tonne, from Thursday's close of $7,545 a tonne. The metal is down 0.3 percent this week. It has dropped by around 5 percent this month.
Fitch Ratings warned this week it might lower its "stable" rating outlook for US banks because of contagion from problems in troubled European markets. "The fear is that what is still a regional crisis will morph into a global crisis of confidence," Robin Bhar, analyst at Credit Agricole said. "But it's not a disaster scenario yet because developing world growth is still the key dynamic for metals."
The dollar fell as the euro rose on speculation the European Central Bank may start lending to the International Monetary Fund to bail out troubled eurozone economies and as Italian and Spanish bond yields retreated. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
European shares hit their six-week closing low for the second day in a row on Friday after cautious comments by the German chancellor cooled market hopes that Germany would back monetary measures to tackle the debt crisis in the eurozone. ECB chief Mario Draghi told eurozone governments on Friday to act fast to get their rescue fund up and running, expressing exasperation at their lack of progress in responding to the escalating debt crisis. "Of all commodity sectors, we consider industrial metals to be particularly vulnerable to a further deterioration in market sentiment," Credit Suisse said in a note.
In a sign that demand could be picking up, copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 11.0 percent from last Friday, the exchange said on Friday. "It's buying on dips. China will restock but it won't restock more than it needs to so that tells me that it's hand to mouth (restocking) but if the price is right they'll come in and buy," Bhar said.
Latest data from the London Metal Exchange (LME) showed copper stocks in LME-registered warehouses fell by 1,375 tonnes to 398,250 tonnes. The metal was also supported by strikes. In Indonesia's Grasberg mine, police said gunmen killed a company security guard on Friday near the Freeport McMoRan Copper & Gold Inc's strike-bound mine as violence escalates in the two-month strike that has halted production in the world's second-biggest copper mine.
Freeport Chief Executive Richard Adkerson said late on Thursday the strike is likely to impact the company's fourth-quarter results. Adkerson also said, in an interview with Reuters, the company is betting on robust Chinese copper demand to drive its industry, even as slower growth in Europe and the United States impact some lines of business. BNP Paribas on Friday lowered its 2012 price forecast for most of the base metals except lead, but forecast a broad price recovery in the year due to firm demand in emerging countries, supply constraints, cost issues and loose monetary conditions. "Downside risks certainly persist, but for some metals, notably aluminium, further losses might trigger widespread producer cutbacks," analyst Stephen Briggs said.
Global miner Rio Tinto's decision this week to close its Lynemouth aluminium smelter in Britain has highlighted the poor health of an industry pinched by lower metals prices and high costs. Aluminium closed at $2,110 a tonne, from a close of $2,094 a tonne on Thursday. The metal has lost around 25 percent since March.
Lead closed at $2,059 from $2,014. Strong demand for batteries is tightening the market for high quality metal used in the auto sector, and the northern hemisphere winter is expected to put further pressure on the European market. Zinc closed at $1,965 from $1,927, nickel at $17,655 from $18,150, tin at $21,275 from a last bid of $21,350 a tonne.