Copper steadies

Copper steadied on Tuesday, pausing for breath as last week's broad rally triggered by the US Federal Reserve's new efforts to stimulate the flagging economy ran out of steam. The Fed said on September 13 it will buy $40 billion a month of mortgage-backed securities bonds in an extension of its quantitative easing (QE) programme that would be open-ended as it seeks to improve the US labour market outlook.
That sent financial markets soaring, but by Monday the rally had reversed as investors turned their attention from central bank stimulus to slowing global growth. Equities, commodities and the euro were all lower again on Tuesday, although three-month copper nudged higher by the close on the London Metal Exchange, ending at $8,319 a tonne, compared with $8,302 a tonne at the close on Monday.
On Friday, it rose to $8,411 a tonne, its highest since May 2 and its biggest single-day rally since June. "The easing news is now behind us and people are refocusing on Europe and the macro picture, which don't look great. So we could see some of the gains (in metals prices) rolled back," said Edward Meir, analyst at INTL FCStone. Investors fear that sluggish demand from China, the world's top copper consumer, would remain for an extended period as the economy slows.
China, which accounts for 40 percent of global refined demand for copper, is on course for its weakest full year of growth since 1999, with 2012 growth likely to fall below 8 percent, a Reuters poll showed. The poll showed pessimism deepening, partly reflecting disappointment at the lack of more urgent policy action to bring down the cost of credit. But any further monetary easing is unlikely to come before a once a decade change in the leadership of China's Communist Party, which may happen next month.
Deutsche Bank analyst Daniel Brebner said for copper to break out of the ranges it has mostly traded in the past few months, the Chinese government would have to follow the lead of the Fed and be more aggressive in stimulating growth. "If that were to happen we would see a decent move higher," he said, but added that it was unlikely before the new government was in place, and possibly not until after the Chinese New Year early next year. Also weighing on prices was a drop in the euro to session lows against the dollar. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.
Worries about the euro zone debt crisis persisted, with uncertainty prevailing about whether Spain will seek a bailout and lingering concerns about the potential for fresh funding problems for Greece. In aluminium, fourth-quarter premiums to Japanese buyers, Asia's biggest importers of the metal, rose 24 percent from the previous quarter to a record high of $254-$255 a tonne as supplies remain tight, traders said on Tuesday. Three-month aluminium ended at $2,160 a tonne from $2,167 at the close on Monday.
The LME price has fallen more than 10 percent since March, but premiums - money paid over the benchmark LME cash price to secure physical metal - have set record highs despite a global surplus due partly to large stocks locked up by banks in financing deals. Also reflecting a lack of available supply, the cost to roll nearby aluminium contracts soared to $15 on a tomorrow, next day delivery, basis, the highest since January, ahead of the September contract expiry this week.
"Expect this week to see more consolidation in an effort to wear off the overbought situation, as well as to test the resolve of the weak longs," RBC said in a research note. Tin ended at $21,595 from $21,575 while zinc, used in galvanising, was $2,108 from $2,089 at Monday's close. Battery material lead ended at $2,274 from $2,257 and nickel closed at $17,820 from $18,220.