Copper

[sumisu]

Copper ticks up, but uncertainty weighs on sentiment

Business Spectator

http://www.businessspectator.com.au/bs.nsf/Article/UPDATE-6-Copper-ticks-up-but-uncertainty-weighs-on-JSL74?OpenDocument

LONDON -- Copper has eked out gains in choppy trade, but uncertainty surrounding the US government's proposed financial market bailout plan left investors sidelined.

Copper for delivery in three months on the London Metal Exchange was untraded in the official rings but was quoted at $US6,990/6,995 per tonne, up $US10 from Tuesday, when the metal, used widely in power and construction slipped four per cent.

"It's really a no-man's land -- everything's going to be in limbo until it's clear how the US Congress will react to the Paulson rescue plan," Gary Mead, senior commodities analyst at Virtual Metals, said.

On Tuesday, US Treasury Secretary Henry Paulson urged Congress not to delay approval for the planned $US700 billion bailout of the financial system which Mead expects could boost commodities across the board.

The US dollar fell against a basket of currencies, nagged by uncertainty surrounding the plan to mop up toxic mortgage debt.

A weaker US currency makes commodities priced in dollars cheaper for holders of other currencies.

But analysts said news that corporate sentiment in Germany, Europe's largest economy, deteriorated for the fourth month running, along with weakening data from other economies, would weigh on industrial metals.

GFMS Managing Director Neil Buxton said the weak fundamentals which have pressured industrial metals in recent months continued to reinforce a picture of weak demand.

"Any correction we have seen is merely an upward blip in a downtrend," he said.

London copper has fallen about 20 per cent compared to its record high of $US8,940 per tonne hit in April, as lack of demand from China, coupled with global financial market turmoil have prompted investors to dump their positions.

"Supply disruptions which have helped support the market earlier this year, take a back seat in the current environment and the market will rightly focus on that demand has weakened and is likely to remain weak for the rest of the year."

Stock moves

Sentiment got a boost from another drawdown in copper stocks which fell nearly 9,000 tonnes this week, mostly as material left warehouses in Korea, likely bound for China, suggesting a pick-up in demand in the world's largest consumer of the metal.

But a 1,275-tonne rise in aluminium stocks to 1.36 million -- their highest level since March 2004 and enough for about 13 days of world consumption -- weighed on the metal.

"Right now everyone is talking about supply overhang, so we will not see a support to prices tomorrow or the day after," said Commerzbank analyst Barbara Lambrecht.

"In the medium term, we think of higher aluminium prices -- they are now very close to production costs so there might be close downs of smelters."

Aluminium, used in transport, packaging and power, was trading $US4.50 higher at $US2,512.50 per tonne, after dropping to $US2,505 in earlier trade.

Lead was up $US19 at $US2,019, after hitting a high of $US2,080 in earlier trade, its highest since August 28.

Tin was untraded, but was last quoted at $US17,550/17,600 per tonne from $US17,400 at close on Tuesday and nickel was quoted at $US17,025/17,050 from $US17,200.

Zinc was last quoted at $US1,791/1,792 from Tuesday's $US1,770.