Copper boosted by Chinese imports
But some analysts question fundamentals of recent base metals rally
theglobeandmail.com
Chris Kelly and Rebekah Curtis
New York, London — Reuters, Thursday, Jun. 11, 2009 05:28PM EDT
Copper climbed to its highest level since mid-October Thursday as rising import levels into top consumer China bolstered sentiment, but analysts questioned the sustainability of this week's stunning rally.
Aluminum rose more than 3 per cent but failed to break through six-month highs of $1,701 (U.S.) a tonne set on Wednesday.
Copper for July delivery on the New York Mercantile Exchange's Comex division jumped 7.80 cents, or 3.3 per cent, to settle at $2.4450 a pound, after hitting a session peak at $2.4575 – the highest level for a second-month position contract since Oct. 14.
On the London Metal Exchange (LME), copper for three month delivery closed up $200 at $5,380 a tonne, after hitting a session high at $5,388 a tonne – another eight-month high.
Catherine Virga, senior base metals analyst with CPM Group in New York, questioned the fundamental strength of the rally that has driven prices of the metal used by many investors as a bellwether of economic strength up over 7 per cent this week and more than 10 per cent so far in June.
“The import figures are definitely something to look at for this short-term rally, but exports are still down, the arbitrage opportunities are gone, and cancelled warrants are trending downward, so I don't know how much of this is a trend story or how much of it is an investor story,” she said.
China's May imports of unwrought copper and semi-finished copper products hit a fresh high for the fourth straight month in May on continued arbitrage trade.
“Even by Chinese standards, the numbers are very strong,” said David Moore, a commodities strategist at Commonwealth Bank in Sydney. “Year-to-date imports are immense. There are a number of factors driving that, that is, restocking, reduced scrap – but it's still a strong number and has been supportive of prices.”
Traders said industrial metals had also been boosted by news that retail sales in the United States rose for the first time in three months in May and weekly jobless claims hit the lowest level since January.
Also underpinning sentiment were stocks of copper in LME warehouses, which at just above 293,000 tonnes compare with levels around half a million tonne in February and March.
China is the world's largest consumer of copper, accounting for about 30 per cent of demand. The country is also the world's largest consumer of aluminum used in transport and packaging.
Aluminum ended at $1,693 a tonne from $1,645 on Wednesday. The metal has come under pressure this year from severe difficulties in the auto sector and record inventories – above 4.2 million tonnes – in LME warehouses.
Stocks slipped for the second time this week, down 1,675 tonnes but holding near a record high close to 4.3 million tonnes. The draw-downs offered some comfort to the market.
Also signalling potentially stronger aluminum demand was a rise in cancelled warrants – metal tagged for delivery – to 118,675 tonnes, up from 74,350 at the start of June.
But analysts say fundamentals in the aluminum market are weak and price prospects are bleak.
“There's a lot of aluminum around, we are seeing a lot of restarts in the aluminum market and there is a huge amount of metal in LME warehouses,” said David Wilson, analyst at Société Générale.
Among other industrial metals, nickel rose more than 6 per cent to an eight-month high of $15,860, and closed at $15,800 from $14,905 on Wednesday.
Zinc hit a high of $1,716.75 a tonne, the highest since Sept. 29. It ended at $1,720 from $1,625.
Battery material lead ended at $1,819 from $1,751.
Tin was untraded at the close, but bid at $15,750 from $15,750 at the close on Wednesday. |
