FRX: METALS-Copper falls on Dubai debt default fears
MARKETS-METALS (UPDATE 4)
* Copper stocks rise, at highest since late April
* Analysts say copper prices exceed fundamentals
* Dollar rises on risk aversion
(Recasts, changes dateline from SHANGHAI)
By Rebekah Curtis
LONDON, Nov 27 (Reuters) - Copper fell 3 percent to a two-week low on Friday, as debt default fears in Dubai shook financial markets and the dollar rose as investors moved into safer assets.
Industrial metals fell across the board. Battery material lead was at $2,262 at 1039 GMT from a close of $2,340 on Thursday. Earlier it fell 8 percent to $2,145, its lowest since early October. Nickel was $16,200 from $16,575, off an earlier four-month low of $15,751.
Copper for three-months delivery on the London Metal Exchange traded at 6,737 a tonne from a close of $6,821.
"It's a healthy correction," said Andrey Kryuchenkov, analyst at VTB Capital.
"Fundamentals in metals are not justifying prices," he added. "I think there is no need to panic at all."
Global shares sank after Dubai said on Wednesday it would ask creditors of state-owned firms Dubai World and Nakheel to agree to a standstill on billions of dollars of debt as a first step towards restructuring.
To see a graphic on risk assets affected by Dubai debt fears, click on: http://graphics.thomsonreuters.com/119/GLB_RSKA1109.gif
A stronger dollar, boosted by its status as a hedge against risk, also pressured industrial metal prices by making dollar-priced commodities costlier for other currency holders.
Gold and oil also took a battering.
PRICES EXCEED FUNDAMENTALS
Investors are generally bullish on the long-term prospects for copper, but analysts warn this year's rally has brought prices beyond where fundamentals lie.
Copper has more than doubled in value so far this year on hefty buying by China, the world's top consumer of the metal used in power and construction.
But this supportive Chinese buying is cooling down and OECD demand is still languishing.
Stocks of copper in LME warehouses continued to climb, up 3,000 tonnes to 435,075 tonnes, their highest level since late April.
Deliverable copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 6 percent from one week earlier, while deliverable aluminium inventories edged up, the exchange said on Friday.
Nickel inventories at LME warehouses rose 2,034 tonnes to 135,480 tonnes, their highest since early 1995.
Among other industrial metals aluminium was at $1,990 from $2,009, having hit a 2-week low of $1,950.
China's top aluminium producer, Aluminium Corporation of China (Chinalco), said it had restarted most of its idle capacity of alumina and primary aluminium.
Tin was at $14,750 from Thursday's last bid of $14,990 and zinc was at $2,196.5 from £2,256.
"At this stage, this set back looks to be one that is very much country specific," Societe Generale said of the Dubai news, in a note.
"It serves as a useful reminder that we have not got away with the financial crisis as easily as the optimists would have us believe." Metal Prices at 1037 GMT Metal Last Change Percent Move End 2008 Ytd Percent
move COMEX Cu 304.40 -12.10 -3.82 139.50 118.21 LME Alum 1986.00 -23.00 -1.14 1535.00 29.38 LME Cu 6733.00 -88.00 -1.29 3060.00 120.03 LME Lead 2256.00 -84.00 -3.59 999.00 125.83 LME Nickel 16150.00 -425.00 -2.56 11700.00 38.03 LME Tin 14625.00 -425.00 -2.82 10700.00 36.68 LME Zinc 2190.00 -66.00 -2.93 1208.00 81.29 SHFE Alu 15445.00 -210.00 -1.34 11540.00 33.84 SHFE Cu* 53500.00 -1400.00 -2.55 23840.00 124.41 SHFE Zin 17705.00 -585.00 -3.20 10120.00 74.95 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
