LME copper jumps to a seven-week high in volatile trade
Source: Hoovers
metalsplace.com
London Metal Exchange copper and zinc both took center stage Thursday, jumping over 4% each on the day, due to technical buying and short-covering with traders expecting volatility to continue near-term.
Three-month copper surged to a seven week high of $6,140 a metric ton on electronic trade after the floor close, up from $5,260/ton seen earlier this month.
The surge in copper in London appears to be due to chart-based factors rather than any copper-specific fresh news, said Edward Meir, analyst with Man Financial. "We broke out above resistance around the $5,950/ton area and stops were taken out," he said.
The gains come despite the absence of Chinese players from the market, which means conditions in copper are relatively thin and activity is volatile.
Earlier, bearish news that the union representing Chilean copper producer Codelco workers at its largest mine, Chuquicamata, had accepted a wage offer failed to dampen sentiment.
The metal's next upside target is $6,400/ton, another LME base metals trader said.
In news, independent consultancy Bloomsbury Minerals Economics said earlier Thursday that the global refined copper market was in a 220,000-ton deficit in 2006 but will reverse this to be in a surplus of 164,000 tons in 2007.
Following copper prices higher, three-month zinc surged to a three-week high of $3,510.25/ton, off its recent price lows.
"It doesn't surprise me to see zinc prices bounce back from recent price lows," said a Europe-based zinc trader, adding that $4,000/ton is a likely next upside target.
Since the start of 2007, zinc prices had declined over 30% to hit a low of $2,990/ton in early February. Since then, zinc prices have steadily climbed roughly 15% as some trader said the sharp fall earlier in the year was overdone.
Despite an increase of roughly 10% in LME warehouse stocks since the start of 2007, overall inventory levels are down nearly 70% on the year, which has continued to provide underlying price support.
Adding to upward momentum, the International Lead and Zinc Study Group, or ILZSG, said Thursday that global refined zinc demand for 2006 exceeded global refined production by 332,000 tons. However, the deficit narrowed from a shortfall of 412,000 tons in 2005.
In other metals, three-month lead extended its recent strength to hit a fresh record high of $1,900/ton, just off the key $2,000/ton technical level.
"Continued strength in the lead price is heavily influenced by tightness on the physical market which has been reflected, for instance, in a gradual decline of combined inventories at exchanges, producers, consumers and merchants," said Michael Widmer of Calyon.
LME inventories fell 150 tons to 32,375 tons Thursday. Overall LME inventories have fallen by more than 20% since the start of 2007.
The drawdown in lead inventories is particularly acute in Europe where there are no available inventories in European-based LME warehouses.
Providing further underlying upside momentum, the ILZSG said earlier Thursday that global refined lead demand for 2006 exceeded global refined production by 10,000 tons.
Meanwhile, ongoing supply concerns at Xstrata's 161,000-ton Northfleet lead refinery in the U.K. continue to provide underlying support. Xstrata has temporarily restricted deliveries to Northfleet, which takes its feedstock from Mount Isa in Australia.
Market participants said price volatility will be the theme – taking advantage of illiquid market conditions – until the return of Chinese players next week following their Lunar New Year holiday.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Wednesday PM kerb
Copper 6130.0-6135.0 Up 340
Lead 1879.0-1880.0 Up 54
Zinc 3480.0-3481.0 Up 130
Aluminium 2795.0-2800.0 Up 38
Nickel 38900.0-38950.0 Dn 600
Tin 13650.0-13700.0 Dn 175
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