By Susan Thomas
LONDON — Copper was steady on Tuesday after the euro trimmed gains against the dollar on waning enthusiasm over a survey showing Germany, Europe’s largest economy, was holding up despite the debt crisis, but gains were limited by scant signs of buying from top metals consumer China.
Three-month copper on the London Metal Exchange was $8,430 a tonne in official rings from $8,425 at Monday’s close. The metal traded as high as $8,479.50 and as low as $8,345.
Earlier, the euro rose against the dollar after German investor sentiment rose this month, defying expectations for a fall, a survey showed. But it later trimmed gains. A strong dollar can pressure dollar-denominated commodities by making them more expensive for consumers using other currencies.
Moody’s warned on Monday it may cut its triple-A ratings of France, Britain and Austria while downgrading several European countries, including Italy.
“It’s general risk-off after the Moody’s cut, but we’re not particularly concerned about the move,” RBS Global Banking & Markets strategist Nikos Kavalis said.
“We’ve been concerned about how fast the (base metals) market rose, and we’ve been saying the market was a little bit overheated,” he said, citing weak fundamentals for copper in China, the world’s biggest consumer of the metal.
While the price of copper has fallen by nearly 4 percent from five-month peaks of $8,765 a tonne hit last week, the metal is still up around 12 percent so far this year.
“Most commodity prices made a strong start to 2012, helped by increasing hopes that the U.S. will lead a strong recovery in the global economy, declining fears of a “hard landing” in China, and faith that a disorderly Greek default can be avoided,” Capital Economics said in a note.
“But all of these supports are fragile and we expect sentiment to turn negative again during the course of the year, causing large falls in the prices of crude oil, industrial metals and many agriculturals.”
Industry sources told Reuters on Tuesday China was likely to import less refined copper from the spot market this month and next due to plentiful stocks and weak demand, which were also weighing on Shanghai prices.
Refined copper stocks monitored by the Shanghai exchange stood at 198,202 tonnes as of Friday, their highest level since August 2002.
WARNING SIGNS
“There are some warning signs coming out of China…The picture of looser Chinese demand has been confirmed by the latest weekly inventory data from the Shanghai Futures Exchange (SHFE),” Credit Suisse said in a research note.
But it added that any weakness in Chinese consumption was likely to be short-lived, given recent indications that global growth was stabilising.
Indeed, European Council President Herman Van Rompuy said on Tuesday the economic fundamentals of the euro zone were sound, but that financial stability alone would not guarantee recovery from its crisis, with more action needed on growth and jobs.
Still, betting on longer-term demand for global copper metal, BHP Billiton and Rio Tinto have approved plans for a $4.5-billion expansion of the massive Escondida mine in Chile, while BHP plans to reopen a U.S. copper mine idled three years ago.
The two miners are already spending billions of dollars expanding output at their Australian iron ore mines to feed Chinese demand, and the push to boost output by 80 percent at the world’s biggest copper mine underscores their optimism about longer-term demand for metals.
The median forecast of analysts in a Reuters poll in January showed the copper market deficit narrowing to 12,000 tonnes by the end of 2013 from 101,000 tonnes this year.
Tin was at $24,840 in rings from $25,000 at Monday’s close, zinc was $2,036.5 from $2,075, aluminium was $2,207 from $2,211 and nickel was $20,350 from $20,550.
(C) Thomson Reuters 2011