METALS-Copper edges up; worries about US economy cap gains

Reuters

* U.S. fiscal cliff concerns weigh on sentiment

* Investors focus on China's leadership transition

* ECB keeps interest rates on hold

* Jump in zinc LME stock cancellations

(Updates with closing prices)

By Harpreet Bhal and Eric Onstad

LONDON, Nov 8 (Reuters) - Copper edged higher on Thursday in cautious trade

ahead of a leadership transition in top metals consumer China, which may result

in fresh economic stimulus measures, while concerns about weak demand and the

U.S. economy capped the upside.

Three-month copper on the London Metal Exchange did not trade at the

close but was bid at $7,630 a tonne, up 0.3 percent from Wednesday, after

recovering from an earlier low of $7,571, a decline of 0.5 percent.

The key industrial metal has shed nearly 10 percent since touching a peak of

$8,422 on Sept. 19, hit by worries about slow global growth, weak demand and

more recently, the potential f9or a U.S. fiscal cliff of spending cuts and tax

hikes, which experts say could cause a recession.

On Wednesday copper hit a two-month low at $7,563.25 a tonne.

"We could see some interesting moves in the metals space due to index

rebasing towards the end of the year, and we might see a bit of a bounce in base

metals prices," said Citi analyst David Wilson.

The two major commodity indexes, the S&P GSCI and Dow Jones-UBS

Commodity Index, are rebalanced each year by altering their commodities

mix. Tracker funds change their weightings in line with the indexes, resulting

in contracts being bought or sold.

" But through November it is difficult to see what is going to move prices

significantly higher or significantly lower. We see bits and pieces of consumer

buying at lower numbers, but sentiment is not particularly positive at the

moment."

Goldman Sachs analyst Max Layton said the investment bank was bullish about

copper in the first half of next year.

"We expect an end to downstream Chinese de-stocking, strong construction

completions growth, a sustained pick-up in Chinese property sales and strong

growth in infrastructure FAI (fixed asset investment) to offset ongoing weakness

in other sectors," he said in a note.

Metals prices were pressured as the euro fell to a two-month low after the

European Central Bank kept interest rates at a record low and said the euro zone

economy showed little sign of recovering before the year-end.

A strong dollar makes commodities priced in the currency more expensive for

holders of other currencies.

Reinforcing the downbeat sentiment, data showed German exports slid at their

fastest pace since late last year and that imports also fell in September,

adding to evidence the euro zone crisis has begun to inflict a heavy toll on the

currency bloc's largest economy.

CHINA LEADERSHIP TRANSITION

Investors kept an eye on China's once-a-decade leadership transition event,

the 18th Party Congress, which opened on Thursday, for hints of any imminent

stimulus measures or future policy direction that might affect metals demand.

"So far, the content of speeches from the 18th Party Congress has been

within expectations. There hasn't been anything particularly encouraging to

investors," said Orient Futures derivatives director Andy Du.

Analysts also warned that supplies of copper concentrates were growing at a

rate that might eventually cause a jump in global refined copper inventories.

"The third-quarter jump in Chilean copper concentrates exports and the

continued rise in China's copper concentrates production would eventually push

refined global copper output up," research firm Minmetals Futures said in a

note.

"Much of the excess supplies may end up in ShFE warehouses. They may also

end up in LME Asian warehouses through Chinese smelters that are able to export

copper under discounted duties if they booked these under their tolling book.

In other metals, lead climbed 1.4 percent to close at $2,207 a tonne

as analysts tipped the metal for outperformance next year.

"The rapidly expanding demand for lead-acid batteries in China appears to be

at odds with the ongoing tightening of environmental regulations, suggesting a

widening Chinese deficit in the years ahead," Nic Brown, head of Natixis

commodity research, said in a note.

"Our forecasts for lead prices anticipate a significant outperformance

versus other base metals in 2013, and evidence from recent weeks reinforces our

bullish view on this metal."

Zinc surged 1.7 percent to finish at $1,929 a tonne after cancelled

warrants, or the metal earmarked for delivery in LME-registered warehouses,

climbed to 684,650 tonnes or 41 percent of total stock.

LME data showed a 30,000 tonne jump in cancelled warrants in

warehouses in Antwerp, cutting the amount of metal available to consumers.

Aluminium ended 0.3 percent firmer at $1,925 a tonne while nickel

added 1.0 percent to $16,160. Tin did not trade at the close,

but was bid at $20,500, up 1 percent.

Metal Prices at 1718 GMT

Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T

Metal Last Change Pct Move End 2011 Ytd Pct

move

COMEX Cu 346.25 2.10 +0.61 344.75 0.44

LME Alum 1922.00 2.00 +0.10 2020.00 -4.85

LME Cu 7634.25 24.25 +0.32 7600.00 0.45

LME Lead 2212.25 36.25 +1.67 2034.00 8.76

LME Nickel 16127.00 132.00 +0.83 18650.00 -13.53

LME Tin 20551.00 251.00 +1.24 19200.00 7.04

LME Zinc 1925.25 29.25 +1.54 1845.00 4.35

SHFE Alu 15280.00 -55.00 -0.36 15845.00 -3.57

SHFE Cu* 55740.00 -820.00 -1.45 55360.00 0.69

SHFE Zin 14875.00 -50.00 -0.34 14795.00 0.54

** Benchmark month for COMEX copper

* 3rd contract month for SHFE AL, CU and ZN

SHFE ZN began trading on 26/3/07

(Additional reporting by Carrie Ho in Shanghai; Editing by Alison Birrane and

Jane Baird)