Copper extends gains as supply fears continue to buoy prices
forbes.com
Wed, 04 Apr 2007 – Copper was higher after breaking through the 7,000 usd barrier yesterday, with supply fears linked to an ongoing strike at Doe Run's La Oroya plant in Peru and positive signs of demand growth in key markets China and the US continuing to buoy prices.
The majority of base metals continued to post gains this morning after a strong day yesterday which saw both nickel and lead setting fresh record highs.
Supply fears over copper boosted the metal as a strike by workers at the La Oroya zinc and copper smelter in Peru run by US-based Doe Run continued into its third day. The company said it is resuming talks with workers today.
The smelter is reported to be running at roughly 40 pct capacity as a result of the strike.
At 11.32 am, copper for three-month delivery rose to 7,275 usd, against 7,230 usd at the close yesterday.
Zinc was up at 3,320 usd against 3,251 usd and lead rose to 1,988 usd from 1,965 usd, also supported by the strike news. Doe Run is the world's second largest lead producer.
The market was also eyeing developments at a copper mine in China's Hubei province, where flooding trapped six miners underground earlier this week.
Fears of flagging demand in the US were also partially alleviated this week, while the market also took comfort from further confirmation Chinese demand is growing strongly.
Data out earlier this week showed US manufacturing growth slowed less quickly than expected in March, further boosting sentiment towards copper.
Figures published by the Institute for Supply Management showed its factory index fell to 50.9 from 52.3 in February, which was 'a little down, but significantly better than expected', according to Numis Securities analyst John Meyer.
Spending for the month on construction, which accounts for a sizeable slice of copper demand, also added 0.3 pct, he said, further boosting sentiment.
Meanwhile a research report released by the State Information Center said China's GDP growth in the first quarter is expected to accelerate to about 11 pct, due to rapid growth in consumption and exports.
Analysts said with demand remaining strong they see further upside potential to the metal. Inventories have continued to fall, with copper held in registered LME warehouses standing yesterday at below 180,000 tonnes, against a peak of 216,000 tonnes in February.
Nickel, yesterday's biggest riser with a 7 pct price hike, dipped slightly to 48,599 usd against 48,650 usd at the close yesterday.
Nonetheless sentiment remained positive, with JP Morgan Securities saying the metal 'looks on track to push towards the 50,000 usd level'.
Backwardation – the premium paid for the cash metal over the three-month price – remains solid, indicating that the market is continuing to value near-term supply, it added.
Aluminium meanwhile edged up to 2,844 usd against 2,843 usd, while tin was at 14,150 usd, up from 13,975 usd. |
