Copper moves higher

Copper rose on Monday after Italy and Greece appointed new leaders to implement austerity measures, although gains were capped by worries about the daunting task ahead for their debt-laden economies. Financial markets generally greeted the arrival of respected economists to head the governments of Italy and Greece with cautious optimism, but doubts persisted on how they will tackle the crisis.
Three-month copper on the London Metal Exchange closed up 1.6 percent at $7,760 a tonne. The metal, used in power and construction, rose nearly 4 percent earlier in the day to $7,933, up from $7,639 on Friday's close. "It's difficult for people to form a strong view at the minute, for traders and also for consumers who tend to be very cautious, working with low stocks and delaying orders," said Standard Chartered analyst Dan Smith. Smith said metals were underpinned by steady sentiment following Italy's change in leadership and successful bond auction but that economic headwinds were outstripping copper's improving fundamental picture.
"The problem is we're heading into the year-end period already. I'm surprised copper hasn't done a bit better. Probably the trend will be a slow grind higher, rather than a sudden jump," he added. The yield on 10-year Italian bonds was around 6.5 percent on Monday, still high but well off the crisis levels above 7 percent hit last week when markets lost faith in Italy's ability to repay its massive debts.
Looking ahead, markets are expected to start focussing on an end-of-month deadline to increase the firepower of the bailout vehicle to 1 trillion euros ($1.36 trillion) - a move that could renew anxiety over the eurozone's prospects.
"On balance the markets seem to be relieved with the political developments in Europe. However, given the debt situation and the painful decisions that have to be made, we still expect downtrends to dominate in the medium term," said BaseMetals.com analyst William Adams in a note. A loosening policy stance on credit in China, the world's top consumer of the metals, should be sufficient to boost demand for commodities such as copper, said Goldman Sachs in a note, as it maintained a buy call on June 2012 LME copper, although the position has lost money.
Chinese banks wrote a much more-than-expected 587 billion yuan ($92.4 billion) of new loans in October, seen as evidence of selective policy easing by the government to keep the world's second-largest economy on an even keel. China, which accounts for about 40 percent of global copper demand, has picked up its buying of stocks of the metal, although concerns persist that the eurozone debt crisis might knock its exports. The latest LME data showed copper stocks held in its global warehouses fell by 2,300 tonnes to 405,400 tonnes - their lowest since mid-February and down more than 70,000 tonnes from their mid-summer highs.
Supply-side prospects for copper also continued to underpin prices. Production at the Grasberg mine in Indonesia has ground to a halt due to a strike, forcing its owner and operator, Freeport-McMoRan, to declare partial force majeure. Other metals reflected a mixed picture. Soldering metal tin fell 2 percent to $21,475 a tonne from $21,925 a tonne, while zinc, used to galvanise steel, finished at $1,943 a tonne from $1,920. Battery material lead ended up 3 percent at $2,055 a tonne from $1,995 a tonne.
Glencore, the world's largest listed diversified commodities trader, has delayed the restart of its 80,000 tonnes-a-year lead plant in Portovesme, Italy, until 2012 to resolve environmental and technical issues, two sources told Reuters on Monday. Aluminium slipped to $2,165 from $2,172, while stainless-steel material nickel ended at $17,800 from $18,100. Ten to 15 percent of world primary aluminium capacity will be shut down or mothballed if world aluminium prices remain at current levels into the first half of 2012, UC RUSAL's first deputy CEO said.