COMEX copper ends off lows, more selling expected
biz.yahoo.com
Monday October 29, 4:47 pm Eastern Time
NEW YORK, Oct 29 (Reuters) - COMEX copper futures closed lower along with London prices on Monday, as traders said they still felt disappointed that no additional copper output cuts were forthcoming as anticipated. On Friday, copper traders went home with expectations that another large production cutback would be announced when No. 3 copper producer Grupo Mexico released third-quarter earnings late Friday.
Instead, the producer issued a statement that said it was considering cutting its copper output. But, that was not enough for a market that had already factored in a large reduction. ``It's like the old adage, 'we're still clutching at straws.' The cutbacks are well and good, but if there's still no demand backing it up, they can cut back as much as they want. It will help, but it's not going to change the economy,'' said one copper trader.
COMEX benchmark December copper <0#HG:> ended 0.40 cent lower at 63.10 cents a lb., although it had fallen as low as 62.45 cents on Monday. The session high was 63.55 cents. COMEX spot October copper finished down 0.20 cent at 62.85 cents. The rest all lost 0.40 at the close. Final copper volume was estimated by COMEX at 9,000 contracts on Monday.
Grupo Mexico said it was seriously considering cutting output in response to the large increase in world inventories. It added that the 220,000-tonne output reduction announced by Phelps Dodge Corp. (NYSE:PD - news) last week was a realistic response to market conditions to help boost low world copper prices. Without a pick-up in demand, however, traders said they think copper prices will continue to slip.
``The market can still go further south with lack of demand. People will be trying to find a home for their copper. What drives these markets is its consumption, not its production,'' said one copper analyst. ``Realistically 57-58 cents, I would imagine, I would hope would be the bottom for copper. It can get there. But, I think people will nibble at these numbers, and if it keeps going lower they will continue to nibble at them,'' he added.
If Grupo Mexico's U.S. unit, Asarco, were to slash production by an amount similar to Phelps Dodge, it may not cause a sustained rally, but it could keep prices from falling too far below current levels, analysts said. ``I can see pieces of business creeping in here or there. As long as you are within five to 10 cents of the bottom, historically that's a pretty good spot to buy. And, one of these days copper will be back at 85 or 90 cents again. Then, they'll look like kings,'' said one analyst.
In the next day or two, traders said they think a consolidation period will take hold. ``If you look chartwise (copper) looks like it's bottomed out a bit, and not really moving one way or the other. That's just what this market needs, a couple of months where it doesn't do anything,'' one trader said.
New York traders said losses in U.S. equities markets added pressure to copper prices. The Dow Jones industrial average closed down 2.9 percent, the Nasdaq composite index lost 3.9 percent and the S&P 500 index finished 2.4 percent lower. Also after copper finished, Chile's Antofagasta Plc (quote from Yahoo! UK & Ireland: ANTO.L) said poor market conditions forced it to dismiss 100 workers at its Michilla mine and put new projects on hold at least until 2005.
London copper increased on the news in after hours trade. London Metals Exchange (LME) three-months copper closed the Monday evening kerb at the session low of $1,377 a tonne, down $19 from the prior close. After hours, LME copper moved up to mid-range levels around $1,387 a tonne.
A lack of new production cutbacks put the London market in a bearish mood on Monday too, said London traders. Some London players said a significant reduction would be needed to draw short positions in the market. Without new production cuts, one analyst said he now looks for copper to retest its prior low of $1,363. On the upside, $1,400 a tonne is now viewed as heavy resistance.
LME warehouse stocks fell 875 tonnes to 737,575 tonnes on Monday. At COMEX metal warehouses, stocks rose 686 short tons on Friday to 210,010 tons. |
