By Eric Onstad
LONDON, Feb 6 (Reuters) - Copper dipped in a second day of modest losses as the dollar
strengthened and physical demand in China was sluggish ahead of the Lunar New Year holidays.
The dollar index rose, making it more expensive for holders of other currencies to
buy metals priced in dollars.
Three-month copper on the London Metal Exchange was untraded in official rings, but
bid at $8,230 a tonne, from $8,271 on Tuesday. It earlier touched a session high of $8,322, not
far off Monday's peak of $8,346, which was the highest since October.
The most-traded copper contract for May delivery on the Shanghai Futures Exchange
closed nearly flat at 59,840 yuan ($9,600) a tonne.
LME copper has gained about 4 percent this year, lifted by upbeat economic data from the
United States and top metals consumer China, but underlying demand has been lacklustre.
'It's encouraging that there's been some signs of a pick up in fund buying with open
interest in copper up almost 10 percent in January,' said Wiktor Bielski, head of commodity
research at VTB Capital in London.
'But there's not much fundamentally that's happened so far this year. From talking to some
of the producers, it's pretty clear that consumers are still living very much hand to mouth.'
Copper is expected to consolidate around current levels ahead of and during the Chinese
holiday, when markets will be closed Feb. 11-15.
Data from Tuesday gave more confidence that the world economy is on the mend as the U.S.
services sector stretched a three-year expansion in January and business activity in the euro
zone showed signs of recovery.
There is unlikely to be a bout of buying when China reopens after the holiday, but there
should be steady demand as investment in the world's second biggest economy gathers pace,
'Five or six provinces are targeting fixed asset investment growth of 30 percent plus. So
without a doubt, there's a lot of momentum in terms of what the plans are for actual investment
and therefore demand for commodities.'
Some analysts, however, are concerned about expansion of supply capping prices as the year
'We are at a turning point, and we don't expect copper to push higher over the second
quarter, with more supply coming through the market and more modest growth in downstream
fabricator demand in China,' said Matt Fusarelli, analyst at Australia-based consultancy AME
AME expects global copper supply to outpace demand by around 300,000 tonnes in 2013, while
China's economy moves to a consumer-led recovery with the pace of fixed-asset investment
slowing, he said.
Investors will be keeping an eye on China's trade data, due out on Friday, to gauge the
country's appetite for copper imports, which are expected to be flat or edge higher in January
as extra term shipments arrived before the Lunar New Year holiday. Imports fell 6.6 percent in
GOLDMAN SEES LEAD SLIPPING
Lead, mostly used in batteries, was also untraded in rings, but bid at $2,435 a
tonne in official rings.
Goldman Sachs analyst Max Layton expects lead prices to fall further over the next three to
six months to around $2,150 a tonne on the back of destocking of lead through the supply chain
He pointed out that the LME lead price has rallied by about 40 percent since mid-2012,
outperforming a largely unchanged lead price on the Shanghai exchange.
'The rally in the LME price, together with the strength in ex-China physical premia, has
seen ex-China prices move well above Chinese prices, which is quite rare and is often associated
with a peak in the LME lead price,' Layton said in a note.
Zinc traded at $2,162 from $2,176.50 and nickel was at $18,505 from a last
bid of $18,695.
Tin traded at $24,895 from $24,925 while aluminium, untraded in rings, was
bid at $2,095 from Tuesday's close of $2,111.
Metal Prices at 1311 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2012 Ytd Pct
COMEX Cu 373.50 -3.50 -0.93 365.25 2.26
LME Alum 2092.50 -18.50 -0.88 2073.00 0.94
LME Cu 8214.00 -57.00 -0.69 7931.00 3.57
LME Lead 2428.25 -22.75 -0.93 2330.00 4.22
LME Nickel 18501.00 -224.00 -1.20 17060.00 8.45
LME Tin 24752.00 -173.00 -0.69 23400.00 5.78
LME Zinc 2161.25 -15.25 -0.70 2080.00 3.91
SHFE Alu 15130.00 -25.00 -0.16 15435.00 -1.98
SHFE Cu* 59600.00 -20.00 -0.03 57690.00 3.31
SHFE Zin 15850.00 -80.00 -0.50 15625.00 1.44
($1=6.2294 Chinese yuan)
(Additional reporting by Manolo Serapio Jr.; editing by William Hardy)
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