The base metals rally continued on Wednesday in Europe helped by higher equities markets and a weaker dollar against major currencies, as better risk appetite and continued short-covering pushed metals up. Base metals, dominated by rising equity markets and concerns over further supply-side disruptions, are seeing short covering activity continue, said Mr Leon Westgate, an analyst at Standard Bank.
Copper
At 11.32 GMT, LME copper was trading at $4,274 a tonne, up 3.7 per cent from Tuesday's kerb close. LME lead was trading at $1,505/tonne, up 2.4 per cent. LME aluminum was trading at $2,141/tonne, up 1.5 per cent. LME nickel was trading at $12,600/tonne, up 5.3 per cent. LME tin was trading at $15,000/tonne, up 1.9 per cent.
Fed rate cut
Traders also said the metals were higher in anticipation of a rate cut in the US during the FOMC meeting, which started on Tuesday. "The equity rally lifted copper prices further, as well as speculation of rate cuts in the US," said Fairfax IS analyst, Mr John Meyer.
Lead
LME lead was supported by the announced smelter shutdown at the US-based The Doe Run Co, further highlighting in the current market conditions the need for more metals producers to curtail production amid falling prices and lower demand. From November 1, the company plans to curtail production at its Herculaneum smelter in Missouri by taking out one of its two furnaces.
Pressure on biz
The company said in a letter to customers that the move was due to a "drastic collapse" of lead and other commodity prices on the London Metal Exchange in recent days, and the pressure the lead price is having on Doe Run's business.
Doe Run previously had said it planned to produce between 1.5 lakh and 1.7 lakh tonnes annually at its primary smelting facility in 2008.
Base metals on the LME are trading higher, spurred by a short covering rally, with large funds covering their short positions, said Citi analyst, Mr David Thurtell.
"They are taking profits and then will likely re-establish new shorts at higher prices," Mr Thurtell said.
Economic slowdown
The global economic slowdown is a massive problem and the recent rise is simply a reflection of the short Comex copper market, Mr Thurtell said.
LME open interest is "not far off" a record high while prices have declined, suggesting it too is short, he added. As a result, "there is potential for an explosive rally," he said.
Source : Business Line
