Copper, Aluminum, Nickel Rise as Fed's Rate Cut Boosts Optimism
London, Jan. 4 (Bloomberg) -- Copper, aluminum and nickel
prices rose, paring losses suffered earlier this week, after an
interest-rate cut by the U.S. Federal Reserve eased concern an
economic slowdown would hurt use of the metals.
Prospects for economic growth, and demand for raw materials,
brightened after the Fed lowered its target for the overnight bank
lending rate by a half-point and said it ``stands ready'' to act
again if needed. Prices of other commodities that swing with the
economy, such as crude oil, also rose after the Fed's move.
Metal prices ``got a boost from hope that the Fed's action
would arrest the slowdown,'' said Robin Bhar, an analyst at
Standard Bank in London. The interest-rate cut ``helped to keep
prices above the critical level.''
Copper for delivery in three months on the London Metal
Exchange rallied as much as $38, or 2.2 percent, to $1,778 a
metric ton on the London Metal Exchange, after yesterday falling
to its lowest level since June. Aluminum for delivery in three
months gained as much as $13, or 0.9 percent, to $1,526 a ton,
while nickel rose $220, or 3.6 percent, to $6,360 a ton.
All three metals are widely used in industry, which makes
their prices vulnerable to the general economic outlook.
Homebuilders rely on copper for pipes and wiring, while producers
of stainless steel are the main consumers of nickel. Aluminum is
used to make products from cans to airplanes.
Pessimism about the world economy has sent aluminum prices
down 5.4 percent in the past six months, while nickel shed 25
percent and copper lost 11 percent.
The drop in metals prices accelerated after the National
Association of Purchasing Management on Tuesday reported its index
of U.S. manufacturing fell in December to the lowest point since
the end of the 1990-91 recession as orders and production
declined.
Metal Prices
Even after the Fed move, some analysts were skeptical of the
prospects for metal prices as the economy in the U.S., the world's
largest, tried to regain speed. The Fed in a surprise move cut the
key Federal Funds rate to 6 percent from 6.50 percent.
``There will be further downward pressure on the prices
during the next three months or so,'' said George Cheveley, an
analyst at CRU International. The cut's effect ``needs time to
feed through to industrial demand.''
Trading on the LME remains thin, as is usually the case in
the beginning of the year, making it easier to move prices,
analysts said.
Copper may rise to some $1,800 a ton, while nickel will
likely reach $6,400 a ton and aluminum about $1,580 a ton,
Standard's Bhar said. Still, copper would be 12 percent below the
peak price reached last year and nickel would be 24 percent lower
than its peak.
``The Fed's decision provides the floor (for prices) but not
a potential for the upturn,'' Bhar said.
Benchmark Brent crude oil in London traded recently at $24.91
a barrel on the International Petroleum Exchange, compared with
around $24.60 when the Fed decision was announced yesterday.
Pare Losses
Even without the rate cut, the metals were poised to pare
some losses because prices had fallen too far too fast yesterday,
analysts said.
The 14-day Relative Strength Index for copper, which measures
the price moves against average changes for the period, plunged to
22 yesterday. Under an RSI score of 30, a contract is considered
to have fallen too far.
Prices of copper and aluminum bounced back, even though LME-
monitored inventories of aluminum increased 0.2 percent to 328,350
metric tons and those of copper rose 0.7 percent to 361,025 tons.
``It's not new metal, it's just being relocated to LME-
monitored stockpiles from other warehouses,'' Bhar said.
--Vladimir Todres in the London newsroom (44 20) 7673 2347, or
vtodres@bloomberg.net/tc/jah |
