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METALS-Copper hovers near 3-month low on Fed worries, China data

Eric Onstad
Friday, 15 Nov 2013 | 12:26 PM ET

* China October power grid investment dips

* Nickel gains amid uncertainty on supply

* Copper 2014 term deals seen at China CESCO next week

(Updates with closing prices)

LONDON, Nov 15 (Reuters) - Copper hovered near three-month lows on Friday on persistent worries about the tapering of monetary stimulus in the United States and after data showed a slowdown in infrastructure spending in the Chinese power sector.

Copper, which staged its biggest weekly drop since late August, fell below a three-month range this week as prolonged worries over the timing and scale of tapering crimped appetite for risk.

Three-month copper on the London Metal Exchange closed at $7,010 a tonne from $6,992 at the close on Thursday. The price, down 2 percent this week, was within reach of its trough on Thursday of $6,940 a tonne, the lowest since Aug. 7.

While falling prices have largely met with solid consumer demand, leading indicators are not as positive, analyst Gayle Berry at Barclays in London said.

Chinese investment in its power grid, which accounts for about 40 percent of its overall copper demand, fell by 14 percent in October, a second straight monthly decline.

"The power grid data is a red flag. It appears to tell us that over the next three to six months we should see quite a sharp slowdown in Chinese copper consumption growth," Berry said.

"There's a divergence between what the leading indicators are telling us and what actual consumption is doing in China, which has been holding up quite strong."

Near-term indicators for Chinese consumption are buoyant, said analyst Joel Crane of Morgan Stanley in Melbourne, pointing to industrial power consumption and auto output. "Prices are likely to eventually recover once this technical-based rout has run its course."

Premiums for term shipments of copper to China are expected to be hammered out in Shanghai next week at an industry gathering. Miners will also be negotiating with smelters on processing charges.

SUPPLY RISK IN NICKEL

Nickel prices rose as much as 1.3 percent to a session high of $13,830 a tonne amid uncertainty on supply. It closed at $13,830 from a last bid of $13,650 on Thursday.

Indonesia, which accounts for 20 percent of global nickel supply, has said it will ban exports of unprocessed ore in January.

"As every day goes by, that Indonesia export ban deadline gets closer and closer. For me that's one of the biggest supply risks the industry is facing over the next few months," Berry said.

"There's a lot of scepticism within the industry about whether the ban will be fully implemented, but the risk is that perhaps the market is being a bit too complacent."

News also emerged this week of a mine closure in Australia following an earthquake.

On Friday, Finnish nickel miner Talvivaara filed for a court-supervised overhaul, without which it risked bankruptcy.

In other metals, aluminium closed flat at $1,791, and lead at $2,096 from $2,095.50. Tin closed at $23,025 from $23,000, and zinc at $1,889 from $1,886. ($1 = 6.0922 Chinese yuan)

PRICES

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

(Additional reporting by Melanie Burton in Singapore; editing by William Hardy and Jane Baird)