LME copper steady on demand, supply views

SHANGHAI: LME Copper steadied on Tuesday as continued fears that the euro zone debt crisis would spread to Italy curbed a more positive outlook linked to fundamental demand and potential supply disruptions in Indonesia and Chile.

News that a strike at the Freeport-McMoRan Copper & Gold's mine in Indonesia, the world's third largest producer, may not be over despite that a wage deal was reached and of China cutting some copper smelting capacities this year lent some support .

In Chile, thousands of Codelco workers went on a 24-hour strike on Monday, which is not hurting the annual output target of the state copper giant for now, but could spell more labor trouble for Codelco and Chilean President Sebastian Pinera.

Three-month copper on the London Metal Exchange edged up 0.01 percent to $9,571.25 a tonne by 0403 GMT, after losing 0.9 percent in the previous session.

The most-active September copper contract on the Shanghai Futures Exchange fell 0.4 percent to its midday close of 71,160 yuan per tonne, narrowing losses from earlier in the trading day when it fell to a low of 70,880 yuan.

Copper fundamentals remained strong with traders reporting steady demand for third-month material to be delivered after the slow summer season in the Northern Hemisphere.

"On the demand side, copper metal will pick up again towards the end of the third quarter as the Northern Hemisphere starts to crank production up after the summer holidays," said MineLife analyst Gavin Wendt.

"On the supply side of things, we still have immediate issues involving strikes in Indonesia and South America."

China has ordered local governments to phase out a total 2.04 million tonnes of aluminium, copper, lead and zinc smelting capacity in 2011 as part of a multi-year plan to crack down on energy-intensive and polluting industries.

But concerns about the global economic outlook remained.

Fears of the euro zone debt crisis spreading to Italy sent stocks and the euro tumbling on Monday.

Euro zone finance ministers promised cheaper loans, longer maturities and a more flexible rescue fund on Monday to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain.

But the assurance failed to help the euro on Tuesday, as it was beaten down further in Asia, plunging to a record low versus the Swiss franc and sinking to a four-month trough against the dollar.

US stocks suffered their worst day in nearly a month on Monday as concern about the stalemate in US budget talks and growing debt problems in the euro zone prompted investors to edge against further losses.

Japanese consumer confidence improved for a second straight month in June, a government survey showed on Monday, boding well for the outlook for household spending and suggesting the economy's recovery from the March earthquake is broadening.

Copyright Reuters, 2011