Some good news going into the new year!!
REFILE-UPDATE 6-Copper up on bargain hunting, seen vulnerable
Sat Nov 24, 2007 2:35am IST
(Refiles to fix column margins in table at bottom)
(Updates with New York closing copper prices, comment)
By Anna Stablum
LONDON, Nov 23 (Reuters) - Copper recovered on Friday as consumers were
attracted by lower prices and mining firms' shares traded higher on M&A talk,
but the market was seen vulnerable due to demand worries and rising
inventories.
Traders in New York said they thought the huge decline in Shanghai exchange
warehouses inventories also contributed to the jump in copper prices that held
into the COMEX close.
European stocks gained ground with FTSEurofirst 300 index of top European
shares rising 1.5 percent while mining firms like BHP Billiton, Rio Tinto
jumped 5-8 percent.
There was market talk of Chinese bidding interest in India-focused miner
Vedanta and talk that Xstrata was weighing a bid for Anglo American. Xstrata's
shares climbed 5.2 percent.
Copper for delivery in three months (MCU3: Quote, Profile, Research) on the London Metal Exchange
rose to $6,700 per tonne, up $135 or 2 percent from Thursday.
"Some buying finally crept into the market on Thursday and this seems to be
continuing today," LME ring dealers MF Global said in a research note.
"But we expect this action to be more short-covering in nature. Therefore,
rallies should continue to prove vulnerable as we head into next week," it
said.
In New York, copper for December delivery (HGZ7: Quote, Profile, Research) jumped 10.30 cents to
close 3.6 percent higher at $2.9910 a lb on the New York Mercantile Exchange's
COMEX division.
"We had a couple things working for it. One is, you saw fresh shorts coming
in over the last couple of days. But I think the key thing that turned it
around was the 21 percent drop in Shanghai stocks. That got people flat-footed.
It was a huge number," said one New York base metals dealer.
The Shanghai Futures Exchange reported on Friday that copper inventories in
its warehouses tumbled 21 percent in the week ended Thursday, falling to 44,855
tonnes from 56,882 tonnes in the previous week. [ID:nBJD000223]
While the Shanghai stock decline suggests Chinese consumption may be
picking up, traders said they will need to see if the buying continues next
week for confirmation.
Base metals have steadied after a month of losses as the flow of bearish
U.S. economic news halted briefly for the Thanksgiving holiday. However, credit
market losses and slowing growth are expected to keep metals under pressure.
CORRECTION
Worries about the health of the U.S. economy have sent copper prices to an
eight-month low of $6,430 per tonne this week, when the metal, used extensively
in construction and wiring, lost around 7 percent.
"The U.S. economy could slow a little bit more than what most people were
expecting and that really will reduce demand for commodities," said Ashok Shah,
chief investment officer at fund manager London & Capital.
"We will see a continued correction in the short term, but robust metal
prices longer-term," Shah said, referring to demand from emerging market
economies underpinning future prices.
Traders on the LME floor said trading conditions were quiet as many players
in the United States stayed out of the market a day after the Thanksgiving
holiday.
"European and U.S. consumer de-stocking, rising LME inventories and
sluggish Chinese buying in copper are all weighing on market sentiment," a
Barclays Capital report said.
Stocks in LME warehouses rose another 925 tonnes to 186,425 tonnes,
equaling almost four days of global consumption and nearly double the levels
seen in mid-July.
"We believe this largely reflects the recent declines in global equity
markets, which have historically been problematic for industrial metals," a
Deutsche Bank report said.
"In the short-term we see the potential for further price weakness in
copper, lead and zinc prices in particular," Barclays Capital said, revising
its forecasts for the two latter metals.
The investment bank forecasts cash lead (MPB0: Quote, Profile, Research) to trade at an average of
$2,400, falling to $2,200 in the second quarter.
Three-months lead (MPB3: Quote, Profile, Research) was at $2,935 a tonne against $2,835 and zinc
(MZN3: Quote, Profile, Research) was also higher at $2,280, up $60.
Zinc prices have nearly halved this year as the market is looking for a big
rise in concentrate availability next year.
Barclays forecast cash zinc (MZN0: Quote, Profile, Research) to average $2,850 in the first quarter
2008 and $2,950 in the second quarter.
Aluminium (MAL3: Quote, Profile, Research) was down $5 at $2,495 a tonne, nickel firmed by $300 to
$29,100, while tin gained $480 to $16,680.
(Additional reporting by Carole Vaporean in New York, Humeyra Pamuk in
London; editing by Matthew Lewis)
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