BASE METALS: NY Copper Falls On US Debt Worries, China View

NEW YORK, Jul 25, 2011 (Dow Jones Commodities News via Comtex) --Copper futures eased Monday as stalled debt talks in the U.S. and hints that the Chinese government would continue its tight-money policy sent traders cashing out of the industrial metal.

Copper for September delivery, the most actively traded contract, was recently down 1.45 cents, or 0.3%, at $4.3955 a pound on the Comex division of the New York Mercantile Exchange.

U.S. leaders Monday seemed no closer to resolving their impasse and raising the country's borrowing limit, with Republican party leaders pressing ahead with their own deficit-reduction plan and Senate Democrats working on a backup plan that could be brought to a vote should talks continue to stall.

Copper futures early last week climbed to three-month highs, boosted by a better-than-expected reading on the U.S. housing sector and speculation that Chinese demand would hold steady. But futures couldn't hold those gains, ending the week slightly lower on worries that a failure to raise the U.S. debt ceiling would roil global markets and upset the wavering economic recovery. The industrial metal is sensitive to the economic outlook because of its widespread uses in construction and manufacturing.

Copper's losses Monday came "with the macro picture weighing over the market like a dark cloud," Barclays Capital analyst Gayle Berry said in a note. "The primary concern is whether U.S. politicians will come to an agreement over the debt ceiling in time to stop a default."

Copper also came under pressure Monday after China's government over the weekend reiterated that it intended to hold to its current economic policy, which market participants interpreted as endorsing the current set of monetary tightening measures.

China, the world's largest metals consumer, during the last year has clamped down on lending and raised interest rates in an attempt to battle accelerating inflation. The moves raised concerns that government could slow down the economy too much, curbing growth and limiting metals demand.

Also Monday, a strike at the world's largest copper mine continued for a fifth day. A mine workers union at the Escondida mine in Chile, which is controlled by BHP Billiton Ltd. (BHP, BHP.AU), walked off the job Thursday over contract demands they say have gone unmet, including an increase in their year-end bonuses.

The mine stands to lose 3,000 tons of copper production for every day workers are on strike.

Copper prices have been supported for much of the past year by the widely held view that mine-production growth would fail to keep up with rising demand. Chile is the world's largest copper miner, accounting for about 30% of global supply.