Base metals pause, copper seen up on China

Base metals pause, copper seen up on China

Base metals prices paused on Friday as the market took stock after the recent rally, but analysts said copper prices were likely to forge higher on stronger Chinese demand.

However, traders said a Lunar New Year holiday in China next week and the Presidents’ Day holiday in the United States on Monday could curb activity and hamper any gains for a few days.

Copper for three-month delivery on the London Metal Exchange was quoted at $5,810/5,820 a tonne in official rings, from $5,840 on Thursday, when it hit a five-week high of $5,935.

At the beginning of February copper fell to a 10-month low of $5,250, a loss of about 40 percent since the record high of $8,800 a tonne in May 2006 on worries about rising stocks, economic slodown and falling demand.

Underpinning copper prices are expectations that Chinese demand after the holiday next week was likely to pick up as the country’s State Reserves Bureau replenished its depleted stocks.

Support is also expected from the U.S. housing market, one of the triggers behind the copper price rout last year, which many economists think has bottomed.

“Pessimism towards copper is overdone,” Deutsche Bank said in a research report. “With a stabilising U.S. housing market … inventory re-stocking in China and rising production cost, we believe the copper price is set to recover.”

A dominant position holding 50 to 80 percent of available — on warrant — stock in LME warehouses, about 102,000 to 162,000 tonnes — could also help copper rally over coming days.

“There are signs of a squeeze in the nearby copper market … The aim is probably to support prices,” Sempra Metals said in a research note.


Nickel has been propelled this week to a new record high of $39,350, triggered by news that available stocks in London Metal Exchange Warehouses at around 1,900 tonnes are less than half a day’s global consumption.

Nickel traded at $39,000 from Thursday’s $39,150 close.

The metal has risen by around 15 percent this year and by more than 60 percent since January 2006 on jitters about scarce supplies and strong demand from stainless steel mills. Around two-thirds of nickel output is used for stainless steel.

However, in the long term some analysts expected nickel and other base metals to fall back.

“For most industrial metals the prognosis isn’t particualrly wonderful,” said Peter Dixon, analyst at Commerzbank.

“But there is sufficient demand out there to mean nickel may not take the same hit as some of the others.”

Tin traded higher at $13,100 a tonne, down from an earlier new record high of $13,300, but up from $13,000.

Prices this year have been boosted by concerns about supply from Indonesia, where most of PT Koba Tin’s furnaces were shut down by police following a probe into alleged illegal mining.

“The situation doesn’t look quite as bad as current market activity would imply,” Dixon said.

Talk on Friday that Indonesia’s PT Timah , the world’s biggest integrated tin miner, might have to postpone shipments helped prices higher in the morning session.

But gains were trimmed after PT Timah said there were no problems with shipments and that the company was working to complete documents needed for export.

Aluminium slipped to $2,807/2,808 a tonne from $2,815 on Thursday after the world’s biggest bauxite exporter, Compagnie des Bauxites de Guinee (CBG), said it had restarted mining and deliveries to Guinea’s Kamsar port.

CBG normally produces just over 14 million tonnes of wet bauxite a year and exports some 13 million tonnes of dried bauxite. Guinea is the world’s largest bauxite miner with annual output of 20 million tonnes.

Zinc shed $40 to trade at $3,390 a tonne and lead traded at $1,765 a tonne, down from an earlier new contract high of $1,805, but up from $1,750 at Thursday’s close.


Share this post