METALS-Copper edges up ahead of US payrolls, Chinese policy meeting

Melanie Burton
Wednesday, 6 Nov 2013 | 2:40 AM ET

* LME copper cash-Nov backwardation could rise further

* LME data suggests 145,000-220,000 T of copper off warrant -Reuters calc

* Coming up: German industrial orders at 1100 GMT

(Adds detail; updates prices)

SINGAPORE, Nov 6 (Reuters) - London copper edged up in low volume on Wednesday, with traders reluctant to take positions ahead of a labour report from the United States and a major policy meeting in China.

Copper has held to a $7,000 to $7,420 a tonne range since early August, supported by steady demand from top consumer China and cheap liquidity in the United States, with the U.S. Federal Reserve not reducing, or "tapering", its bond-buying programme.

"Commodity prices in general improved last month, which seems to be related to expectations for (delayed) tapering. We are expecting tapering to begin in March," said Alexandra Knight at National Australia Bank in Melbourne.

"There might be some upside risk for non-farm payrolls on Friday ... but metals are a bit directionless for now."

The U.S. will release its October labour market report at the end of the week. A sustained recovery in the job market is a precondition for the Fed to begin hauling back its commodity-friendly stimulus.

Three-month copper on the London Metal Exchange was little changed at $7,176 a tonne at 0706 GMT after a small gain in the previous session.

The most traded January copper contract on the Shanghai Futures Exchange finished flat at 51,590 yuan ($8,500) a tonne, heaving earlier touched a one-week low.

Shanghai aluminium plumbed the lowest in around three weeks at 14,285 yuan a tonne before cutting its losses, tracking LME prices, which on Tuesday sank to a one-month trough.

Chinese trade data is due on Friday. Imports of the main commodities probably eased from record levels last month due to a week-long holiday in October, but shipments of crude oil, copper and iron ore are still expected to post strong annual growth as economic recovery gathers pace. ID:nL3N0IR1MD 3/8

Markets are also watching for any news from a closed-door meeting of the central committee of China's ruling Communist Party from Nov. 9-12, which is expected to set out the country's economic agenda for the next decade.


Copper prices could find near-by support if a large short position in November is forced to cover, traders said. Cash copper climbed to a $5 premium against the November contract from a $12 discount in mid-October. <MCU0-X3>

Reuters calculations based on LME data show that November's short position could be to hedge as much as 145,000-220,000 tonnes of metal that is not in the LME warehousing system. <0#LME-FBR>

This figure tallies with a drop in LME copper stocks and may suggest metal leaving warehouses is going into storage rather than for consumption. LME stocks have dropped by around 210,000 tonnes, or by one-third, from mid-June to around 470,000 tonnes, the most recent data shows. <MCUSTX-TOTAL>

Chinese metals producer MMG Ltd expects copper prices to hold around current levels in the medium term, with the market supported by solid growth in demand and new mines ramping up output more slowly than projected.

In contrast, MMG expects zinc prices to rise as growth in demand is set to outpace supply as several older mines outside China shut down and miners struggle to develop new supply sources.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin

($1 = 6.0968 Chinese yuan)

(Editing by Richard Pullin, Joseph Radford and Alan Raybould)