Copper rallies after strong rebound in US housing starts
Source: AFX
metalsplace.com
Tue, 20 Mar 2007 – Copper rallied after US data showed a stronger than expected rebound in new home construction in February eased worries over the health of the US economy and the outlook for copper demand.
The Commerce Department said new home construction rose 9 pct in February in a sharp rebound after plunging 14.3 pct in January. The market a much smaller increase.
'Metals have reacted, we have seen evidence in copper which has rallied up a 1 pct or so,' said UBS Investment Bank analyst Robin Bhar.
He noted while the data also showed builders' applications for new permits fell 2.5 pct in February, the market had not sold off. New building permits are considered a reliable gauge of future activity in the housing market.
'Certainly the data is mixed ... (but) people are just looking at the bullish news,' said Bhar. He added that participants might be expecting stronger building permit data in the months ahead.
LME copper for 3-month delivery was up at 6,680 usd a tonne against 6,630 usd at the close yesterday.
The metal was underpinned earlier after the LME said in a daily report copper stocks held in its warehouses fell again, this time by 1,925 tonnes to total 190,250 tonnes. LME stocks are down over 9 pct from a year ago.
'Given the upward momentum in the copper market, we would not rule out the possibility of further price gains in the near term,' Commonwealth Bank of Australia analyst David Moore.
He added that, while he does not believe supply demand balances will be tight enough to keep copper prices at current levels over the course of the year, he still thinks by historical standards copper will hold at high levels.
Yesterday, the copper market shrugged off news of a recent Chinese rate hike as traders took the view the hike will have little impact on the country's economic growth in the longer term.
Copper has gained 3.5 pct this year, underpinned by declining LME stocks and strong demand from China.
Nickel was down at 46,000 usd a tonne against 46,600 at the close yesterday, off a day low of 45,500 hit ahead of the US housing data release.
Analysts are warning the metal, which last week hit a series of successive record highs, is starting to look vulnerable.
'The two-day decline in nickel thus far as been within the scope of previous corrections ... but one of these corrections is going to be the real thing,' said Man Financial analyst Ed Meir.
Nickel hit a new record 48,500 last Friday amid critically low inventories and strong demand from the stainless steel market, which accounts for some 70 pct of total nickel consumption.
Chinese nickel producer Zinchuan warned yesterday long-term damage is being done to the nickel market by the high price, both in terms of encouraging additional production and substitution in the steel market.
Tin was down at 13,820 usd a tonne against 13,950 usd at the close yesterday. The metal did not benefit from the US housing data although it did set a new contract high of 14,150 usd a tonne earlier in the session.
Analysts said tin, which has set a series of contract highs this year, remains underpinned by worries over supply disruptions in Indonesia, the world's second largest tin producer.
The Indonesian government, which is still engaged in a crackdown on illegal tin mining, has said PT Koba Tin will be allowed to export the metal, although the company has still not been issued with export permits.
'(Tin) production remains a shadow of its former self. In February we forecasted that the tin market will be in deficit by 12,000 tonnes this year, a figure that is increasingly looking conservative,' said Standard Bank in a note.
In other metals, zinc was up at 3,235 usd a tonne against 3,205 usd at the close yesterday, aluminium was up at 2,823 usd against 2,813 usd, while lead was down at 1,940 usd against 1,942 usd. |
