May 23 (Metal Bulletin) - After a week that began with a sharp
rise in the LME copper price to $1,750 per tonne basis three
months on May 21, the rally stopped "not unexpectedly", with
the price drifting back to close at $1,741 on May 22.
Traders attributed the earlier rise to fund buying of baskets
of commodities, including copper, aluminium and gold. "Funds
are generally having a more positive view of metals," said a
trader, and support for metal markets is also coming from
stockbrokers, with shares in mining companies tracking the rise
in the gold price.
Most of the activity at the start of this week was once again
short covering by funds and traders. Another trader reported
that: "The market is very much oversold. Everyone is very
short at the moment."
With genuine consumer interest still lacking, there were doubts
whether the prices would be sustained at a high level. "The
fundamentals haven't changed," said one trader, and prices are
expected to remain either side of the $1,700 mark, in the range
of $1660-1740.
Recent announcements by the ICSG showing an increase in the
monthly world copper surplus, and Phelps Dodge's decision not
to cut production further have not helped confidence in the
copper market. But the report of a strike at Palabora has not
had much influence, with one trader saying: "Everyone probably
breathed a sigh of relief upon hearing the news."
European consumers of copper cathode are reported to be selling
material back into the market as production schedules are
scaled back. Gloomy economic conditions have reduced demand for
copper products such as rod and wire, and consumers of scrap
have suffered poor sales.
Spot orders in the physical market have been virtually non-
existent for some months, in what is usually the busiest time
of the year. There is also a shortage of copper scrap and only
the market for standard grade copper is showing any signs of
good volumes.
"Producers are very depressed - their first-quarter results
are poor, and the cut in base interest rates is not going to
help much," said one trader.
The low demand for copper in Asia may also mean material being
diverted into Europe. Several traders have said that Japan and
South Korea are simply "not buying" at the moment, and demand
from China, though good, is not as promising as was hoped.
Premiums are low at the moment and are set to remain that way,
according to trade sources. They said that premiums for grade A
copper in Rotterdam are currently just under $30 per tonne over
LME, while premiums in Liverpool are in the mid-$30 per tonne
range. Premiums for Italy are reported to be around $40.
With summer shutdowns looming, the market is unlikely to pick
up until the autumn. "We are basically finished for this
year," lamented one trader, echoing the feelings of others in
the market.
The world copper supply-demand surplus for the first two months
of 2001 was 107,000 tonnes compared to a deficit of 9,000
tonnes for the same period last year, according to the latest
figures from the International Copper Study Group (ICSG).
Growth in refined production exceeded the growth in mine
production - primary refined output for January and February
2001 was up 4.7% compared with the same period of 2000, whereas
mine production was up 3.5% in the same analysis. Secondary
refined production rose by 2.1%.
Total refined production and world usage have both fallen since
January. February's total refined production was down from
1.30m tonnes in January to 1.19m tonnes, and total world usage
dropped from 1.22m tonnes to 1.18m tonnes over the same period.
Stocks of refined copper on the LME, Comex and SHME totalled
641,033 tonnes at the end of April 2001, up 9% over March 2001.
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