Copper ends higher on bullish outlook
Source: Hoovers
metalsplace.com
London Metal Exchange copper is poised for further near-term gains as sentiment remains bullish due to falling inventories and strong demand from China, analysts said Monday.
LME base metals started the week trading in the red as news that China's central bank had decided to raise interest rates by 27 basis points dampened upside price momentum.
However, the reaction of LME base metals to the Chinese rate hike has been rather muted, Kevin Norrish of Barclays Capital said. Instead, "we expect further (base metal) price firmness to emerge as we enter the seasonally strongest quarter for demand in light of the market's firming fundamentals, supply disruptions, and an environment of low inventories," Norrish said.
Three-month copper rebounded from session lows to a PM kerb of $6,625 a metric ton following a drawdown in LME stocks. Declining LME stocks – down 9% from month-ago levels – and strong Chinese demand continue to underpin prices, traders and analysts said.
However, a softer U.S. housing market is one factor that has limited the upside momentum, according to analysts. Therefore, the markets will keep a close watch on U.S. housing starts data for February due for release Tuesday at 1230 GMT.
Meanwhile, profit-taking and an increase in LME nickel stocks Monday pressured nickel prices off their recent record high of $48,500/ton to a PM kerb of $46,550/ton.
LME nickel prices remain at "absolutely crazy" high levels and price volatility is "absurd," said one nickel physical trader. "The physical business is a nightmare to operate in at such levels as no one has a feel for price direction," said the trader.
"Although stock levels are critically low, they've been low for a while now and it's an old story," the trader added. Available LME nickel stocks comprise less than one day's worth of global nickel consumption.
"Stainless steel markets are primarily the cause of the shortage in nickel availability as stainless steel production remains strong, particularly in China, and supply struggles to match consumption," John Meyer of Numis said.
Three-month tin jumped to a fresh record high of $14,125/ton before retreating to a PM kerb of $13,900/ton due to ongoing supply concerns in Indonesia, one of the world's largest tin producers, and LME stocks down nearly 30% since the start of 2007.
Last October, Indonesia closed dozens of small-scale smelters that together produced about half the country's annual tin output on allegations they were purchasing tin ore illegally, damaging the environment, and evading taxes.
Adding to market uncertainty, Indonesian prosecutors said over the weekend that they are confident a court will find a local subsidiary of Newmont Mining Corp. and a top executive guilty of polluting a bay with toxic chemicals when judges announce their verdict in April.
A panel of judges is scheduled to announce the verdict on April 4 in a case that has been ongoing for 20 months.
In other metals, three-month zinc traded to a session high of $3,260.25/ton before retreating to a PM kerb of $3,200/ton.
LME zinc looks set to underperform the base metals complex in the near term as rising LME stocks continue to rattle the investment community, a trader said. The key to longer-term price direction is whether zinc stocks continue to build in Asia and whether China continues to export zinc, the trader said.
LME zinc stocks have climbed roughly 6% from month-ago levels and 13% from the start of 2007.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Friday PM kerb
Copper 6625.0-6630.0 Up 20
Lead 1940.0-1942.0 Up 14
Zinc 3200.0-3205.0 Dn 45
Aluminium 2812.0-2813.0 Dn 1
Nickel 46550.0-46600.0 Dn 1150
Tin 13900.0-13950.0 Up 55
|
