Copper

[sumisu]

Copper leaps 3 per cent on China

MICHAEL TAYLOR

Reuters

December 15, 2008 at 7:09 AM EST

http://www.theglobeandmail.com/servlet/story/RTGAM.20081215.wbasemetals1215/BNStory/energy/home

LONDON — Copper rose more than 3 per cent before easing back on Monday, buoyed by optimism over the Chinese economy and a weaker dollar.

However, rising inventories fuelled fears of over supply.

China's State Council announced at the weekend a series of measures, including a 17 per cent increase in broader money supply, aimed at driving up growth. It follows a near $600-billion (U.S.) stimulus package announced last month.

The broadly weaker U.S. dollar and rising equity markets also helped give industrial metals a lift.

By 1033 GMT, copper for three month delivery on the London Metal Exchange advanced to $3,200 from $3,175 at the close on Friday and compared with a session high at $3,280.

On Friday, copper slipped 4 per cent after U.S. lawmakers failed to agree on a plan to rescue carmakers.

Prices of the metal used in power and construction have fallen about 65 per cent since a record high of $8,940 in July.

“(China) is for the longer term ... it's positive,” said Robin Bhar, senior metals analyst at Calyon. “It may not lift these things out of their doom and gloom straight away but it's positive.”

“Essentially (metals are) marking time,” added Mr. Bhar. “We might edge higher for the rest of the week because it's the last full trading week for the year.”

LME stocks jumped 8,000 tonnes to 314,825 tonnes, its highest point since February 2004, a reminder of copper's weakened state of demand.

More negative news came in the form of Chinese industrial output growth, which slowed to 5.4 per cent in November, the slowest in nine years and well short of forecasts of 7.1 per cent rise.

Adding to the underlying negative sentiment, output in Australia is seen falling short of earlier forecasts.

“The economic picture isn't (looking too great),” said Max Layton, an analyst at Macquarie Bank. “But the prices have fallen so dramatically that for most of the commodities, it only looks like 10-15 per cent more downside from here before they start to reach similar kinds of levels as in previous economic downturns.”

“That doesn't mean they can't touch that level and then average around these levels through the first half of next year.”

Aluminum hit $1,540 and was last at $1,510 from $1,498 on Friday. The metal used in transport and packaging has come under pressure in recent weeks on negative data from the slowing auto industry.

Highlighting its uncertainty, aluminum stocks rose 13,575 tonnes to 1.932 million tonnes, its highest level since November 1994.

Nickel was at $10,375 from $10,650 at the close on Friday, while lead was at $1,050 from $1,018 and zinc at $1,097 from $1,065.

“Short-covering should take these things to challenge the recent highs in the last few weeks, but I wouldn't get carried away because this is not the reversal of the bear market – it's a correction within the overall downtrend,” said Calyon's Mr. Bhar.

Tin rose to $11,550 versus $11,400.

On the data front this week, investors will look to U.S. industrial output figures due later in the day, a likely interest rate cut from the U.S. Federal Reserve and the results of OPEC's Dec. 17 meeting where it is expected to cut output for a third time to shore up prices.