I think some people do not understand that with Copper Mines
idle in kongo, Zambia (once biggest producers)and with China
planning (pretty much has to) trillion $ on infrastructure in next three
years, that if Japan were come-out of recession we would see
a mother of all inflation pressures in commodities...
Headline: Asian Metals - Surplus seen weighing on copper
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By Lynne O'Donnell
SHANGHAI, April 20 (Reuters) - Copper prices are facing a
last chance to rally before a surplus hits the market and pushes
prices down for the medium term, Asian traders said on Monday.
Additional supply expected to come on stream in the second
half of 1998 could see prices slip to $1,700 per tonne and
below, traders and analysts in the region said.
Chinese demand was seen as sluggish and was not expected to
pick up enough to maintain price buoyancy, they said.
Prices now targeting $1,900 and beyond were riding the back
of strong peak-season demand in Europe and the United States,
traders said.
But the traditional slowdown that comes with the northern
hemisphere's summer would coincide with increased supply from
various producers, mostly in Chile, they said.
The copper industry was seen producing a surplus of 360,000
tonnes in 1998, according to forecasts made early this month by
Metal Bulletin Research.
These factors, combined with any knock-on effects in the
European and U.S. markets from Asia's financial problems could
hit prices hard, they said.
"The northern summer will be a harsh one because as demand
picks up after the summer, there will be so much more copper
supply than demand," an Australian broker said.
"It is the last chance for copper for a couple of years.
Once the extra supply comes on stream, I see prices at $1,700
and down," he said.
Another industry analyst said prices around $1,650 per tonne
were "looking interesting."
Analysts polled by Reuters said Chinese imports so far this
year had come on the back of arbitrages between the Shanghai and
London metal exchanges.
"Consumption is sluggish and it doesn't look like there is
any real intention of topping up the strategic stockpile now,"
said a trader in China.
Copper closed Friday's afternoon kerb on the London Metal
Exchange at $1,854, having hit a high of $1,863 on rumours that
Asarco's (NYSE:AR) Hayden smelter in the United States was facing
unspecified problems.
Asarco said there were no problems and they would restart
the smelter on Sunday, one day later than planned, after a
maintenance closure.
The spike up from $1,825 to the day's highs above $1,860 was
indicative of the nervousness of the market, traders said.
They said that some chartists pointed to an inverted
head-and-shoulders pattern that could see prices as high as
$2,100 in the current rally, traders said.
But traders and analysts were mostly bearish on the medium
term.
The current strength in the market had been driven by fund
short-covering and heavy forward selling, they said. The forward
activity indicated producers did not see these prices lasting.
"The heavy forward selling we have seen is indicative of the
lack of confidence," said another broker in the region.
"The question is when will the rot set in?. The strength
since mid-February has been based on that fickle thing called
sentiment, driven by speculative activity, mostly from the
funds," he said.
"The funds were short at good levels and they saw their
gains frittered away and covered themselves. Then we saw a big
drop a couple of weeks ago when the market lost $100 in one day
based mostly on fears about Japan," he said.
The Asian downturn had seen copper diverted to the hotspots
of Europe and the United States, traders said.
"All it takes is for demand to level a little bit for
cathode in Europe and America, as well as the rumblings out of
Asia, for the copper price to move into the 1600s," said another
Western broker in the region.
"Sooner or later, the market will realise that supply will
outstrip demand pretty soon," he said.
-- Shanghai newsroom (8621) 6355-2001; fax 6355-5015
Copyright 1998, Reuters News Service |
