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METALS-Copper slips on dollar, China demand worries

Published 11/22/2010, 03:01 PM
Updated 11/22/2010, 03:04 PM

* China demand for refined copper down in October

* Signs that potential aluminum ETP priced into market

* Codelco hikes annual physical copper premiums

* Coming up: U.S. Q3 growth data on Tuesday (Recasts with New York closing copper price, adds New York dateline/byline and analyst comments)

By Chris Kelly and Rebekah Curtis

NEW YORK/LONDON, Nov 22 (Reuters) - Copper ended lower on Monday after a slide in Chinese imports reinforced concerns over the country's economy-cooling efforts while fears of euro zone debt contagion pushed the dollar up on safe-haven buying.

The industrial metal emerged as one of the worst performers in the broader commodities complex, ending near session lows after data showed refined copper imports by China, the top consumer of the metal, fell nearly a third in October.

"This is all concern about tighter monetary policy in China," Bart Melek, global commodity strategist with BMO Nesbitt Burns in Toronto, said of the red metal's start to the week.

"The concern is, do the Chinese implement some sort of price control plan to keep these commodity prices from moving any higher," he said.

On the London Metal Exchange (LME), copper for three-months delivery ended down $114 at $8,290 a tonne, near the bottom of its $8,210 to $8,516.75 range.

COMEX copper for December delivery sank 8.20 cents, or 2.1 percent, to settle at $3.7515 per lb, also near its session low at $3.7260.

COMEX copper volumes remained brisk despite the onset of a holiday-shortened week. The total stood at 51,396 lots by 1:59 p.m. EST (1859 GMT), nearly 9 percent above the 30-day average near 47,300 lots, Thomson Reuters preliminary data showed.

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New York commodity markets will be shut on Thursday for the U.S. Thanksgiving Day holiday. Trading will resume on Friday.

Copper held firm overnight, tracking upside momentum in the euro, after the European Union and International Monetary Fund agreed to a three-year bailout plan for debt-strapped Ireland.

But as that initial optimism faded, so did the metal's gains, as concerns about possible contagion to other highly indebted states in the 16-country euro zone grew and Chinese demand worries persisted.

"The Ireland situation is affecting risk appetite but there are other things impacting copper -- worries about a slowdown in China, with the China copper imports being relatively low in the most recent data," Standard Chartered analyst Dan Smith said.

Still, signs of Asian demand were well and strong.

The world's top copper producer, Chile's Codelco, upped annual physical copper premiums for Chinese buyers by 35 percent, to $115 a tonne in 2011.

ETPS PRICED IN

Signs have emerged that prospective exchange-traded products (ETPs) or funds (ETFs) for LME metals, like aluminum, are being priced in to metals markets, even though they have not yet been approved, Standard Bank said.

"While some of the tightness may be related to the impact of warehousing deals, the recent movement suggests that fears over the impact of ETFs on metal availability may also be manifesting itself in the aluminum spreads," Standard Bank analyst Leon Westgate said in an note.

The premium on LME aluminum for delivery in 27 months has narrowed against the benchmark three-months contract to $90 from around $120 last week, LME data shows.

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Elsewhere, LME warehouse copper stocks kept trending lower, down 825 tonnes to 359,000 tonnes, the lowest in over a year.

Concern about supplies in the near term have pushed copper into a $23.5 a tonne backwardation -- a premium for cash material over the three-month contract -- compared with a discount of $20 a tonne at the end of October.

Among other metals, aluminum ended up $24 at $2,288 a tonne, while zinc shed $22 to close at $2,138 a tonne. Lead ended down $27 at $2,250 a tonne. Tin slumped $700 to end at $24,300 a tonne and nickel fell $250 to $21,600 a tonne. (Additional reporting by Melanie Burton in London; Editing by Michael Taylor, Anthony Barker and Dale Hudson)

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