Copper rose on Monday on upbeat manufacturing data from China, ending the year up more than 4 percent, though uncertainty over whether US lawmakers will reach a deal to avert a fiscal crisis kept the near-term outlook cloudy. World shares were steady on Monday, set to end the year up 13 percent as US politicians prepared for last-minute talks to avoid a fiscal crunch of spending cuts and tax rises that could drag down the world economy in 2013.
While hope has largely evaporated for any sort of broad deal, the lack of panic on markets shows that investors expect officials to find a solution to the budget problems early in the new year. The measures that start in January will also have only a gradual impact. For metals investors, hopes centre on China, the world's top copper consumer.
The HSBC Purchasing Managers' Survey earlier showed that December activity in China's vast manufacturing sector hit its fastest rate since May 2011. Three-month copper on the London Metal Exchange rose to as high as $7,970 - its highest since December 19 - and was $7,929 in the final ring session of the year. The metal rose more than 4 percent this year.
"I think we'll see a rally in copper prices in the first quarter and I wouldn't be surprised to see new money hitting commodities early next year as it is still a good investment. I think the fiscal cliff will be resolved at some point," said Randy North, director at RBC Capital Markets. Tin was the outstanding winner of the base metals complex this year, rising almost 22 percent, helped by export bans by top exporter Indonesia and steady demand by the electronics industry. Tin usage tends to stay fairly constant through recessionary periods, North added.
After spending most of 2012 in a defensive crouch, cowed by past crises and on guard against any future problems, more investors seem willing to take risks in 2013 in search of greater reward, money managers say. "Investor sentiment is tremendously positive," said Ivan Szpakowski, an analyst at Credit Suisse in Singapore. "But LME is held back by the 'fiscal cliff' talks in the US If we can get past that, the China story can become more powerful in terms of driving global prices."
In the face of uncertainty over the fiscal negotiations, hedge funds and money managers had reduced their net long positions in US copper futures and options by nearly 40 percent in the week to December 24, the US Commodity Futures Trading Commission said. In other metals, aluminium, untraded in rings, was last bid at $2,071 a tonne from $2,063 at the close on Friday. The metal gained less than 3 percent this year, reflecting chronic global oversupply.
Rusal, the world's largest aluminium producer, and the government of Guinea have signed a plan to develop the Dian-Dian bauxite deposit, which will involve building an alumina refinery and gradually increasing ore output. Zinc traded at $2,064 in the final ring session, from $2,052.5 at the close on Friday. The metal rose almost 12 percent this year. Lead, untraded in rings, was last bid at $2,340 a tonne and rose 15 percent this year.
Nickel traded at $17,155 per tonne from $17,200 on Friday. The metal, used in making stainless steel, was the sole loser among the six base metals, ending the year down 8 percent. Its underperformance reflects a sharp drop in demand for stainless steel, particularly in Europe.
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