Copper Prices Fall Amid Signs Mining Companies Sell After Rally
2005-06-28 11:58 (New York)
By Claudia Carpenter
June 28 (Bloomberg) -- Copper in New York fell for the first
time in three sessions on signs that producers are selling more
metal before it is mined after prices rose as much as 16 percent
since mid-May.
Miners and other large commercial traders increased their
sales of copper-futures contracts in New York for four straight
weeks, government figures show. Prices climbed to a 16-year high
on June 17 in New York and a record in London as demand in China,
the world's biggest consumer of copper, outpaced supply.
``I suspect there would be producer selling because prices
are at record levels, and it's doubtful the market will stay at
record-high levels forever,'' said John Gross, director of metals
management at Scott Brass Inc. in Cranston, Rhode Island. Prices
are ``fairly attractive'' for copper deliveries next year, Gross
said.
Copper futures for September delivery fell 1 cent, or 0.6
percent, to $1.5553 a pound at 11:57 a.m. on the Comex division
of the New York Mercantile Exchange. Prices have gained 29
percent in the past year, reaching highs of $1.61 in New York and
$3,435 a metric ton ($1.558 a pound) in London on June 20.
A futures contract is an obligation to buy or sell a
commodity at a set price by a specific date.
Commercial traders, who use futures to hedge risk, increased
sales, or bets that prices will fall, to 63,875 contracts as of
June 21, up from 62,980 a week earlier, the U.S. Commodity
Futures Trading Commission said. Purchases, or bets on higher
prices, dropped to 38,069 contracts from 41,424.
The figures ``probably mean producers are doing some
hedging,'' said William O'Neill, a partner at Logic Advisors LLC,
a commodity-consulting company in Upper Saddle River, New Jersey.
``If you were running a mine and you were trading, you would be
doing some selling up here. These are very good prices.''
Buying Minimum
Copper futures are in ``backwardation,'' in which the spot
contract is higher than the months that follow. The higher price
for June copper, now at 6.75 cents more than July, may encourage
buyers to hold off on purchases to take advantage of lower prices
in later months.
``With prices at these levels, they are buying only the
minimal quantity, as little as possible, to avoid getting hurt by
the backwardation,'' Gross said. Today is the last day to trade
June copper.
China is the only metal buyer showing increased demand this
year, figures from the International Copper Study Group show.
Copper imports more than doubled in May from a year earlier to
125,088 tons, the Beijing-based customs office said June 24.
`Huge Amounts'
``China continues to import huge amounts,'' O'Neill said.
``Other than that, globally, I think demand may be a little bit
less than some people think.''
Consumption in the U.S., the world's second-biggest copper
buyer, dropped 11 percent in the first quarter from a year
earlier, and Japan's demand was down 13 percent, the Lisbon-based
Copper Study Group said earlier this month. Japan is the third-
largest copper buyer.
China is ``driving copper prices at the margin,'' said
Ronald Shorr, a New York mining consultant. Any increase in crude-
oil prices, which fell today from a record yesterday, has
``relatively minimal importance'' to copper prices, he said.
Global copper consumption has exceeded supply from mines and
scrap yards since 2003, eroding global inventory. Metal in
warehouses approved by the London Metal Exchange is down 71
percent in the past year, and stockpiles monitored by the Comex
have dropped 84 percent.
Some metal may be headed back into warehouses soon, O'Neill
said. ``One New York dealer, who has a pretty good feel for the
market, sees material coming into London, potentially,'' he said.
Prices on the Shanghai Futures Exchange fell 0.6 percent to
32,800 yuan a ton ($1.797 a pound). Copper for delivery in three
months on the London Metal Exchange fell $26, or 0.8 percent, to
$3,360 a ton ($1.524 a pound).
--Editor: Stroth, McKiernan |
