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Gold/Mining/Energy : Copper - analysis -- Ignore unavailable to you. Want to Upgrade?

To: RagTimeBand who wrote (38)	4/20/1998 9:41:00 AM
From: RagTimeBand	Read Replies (1) \| Respond to of 2131

Asian Metals - Surplus seen weighing on copper By Lynne O'Donnell biz.yahoo.com Monday April 20, 4:19 am Eastern Time 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 (AR - news) 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.