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Zinc dips, Copper Fluctuates With Dollar Ahead of Fed Announcement on Extra Stimulus
By Chanyaporn Chanjaroen - Nov 2, 2010 11:42 PM PT

Copper fluctuated with movements in the dollar before the result today of a Federal Reserve policy meeting which may agree further stimulus for the U.S. economy.

Three-month-delivery copper dropped as much as 0.5 percent to $8,395 a metric ton on the London Metal Exchange before trading at $8,426 at 2:26 p.m. Singapore time. The contract climbed 1.6 percent yesterday to the highest level since Oct. 27. December-delivery metal on the Comex in New York fell 0.2 percent to $3.833 a pound, while February futures in Shanghai added 0.9 percent to 64,080 yuan ($9,600) a ton.

The dollar fluctuated against a basket of six currencies. The Federal Reserve policy makers probably will announce a plan to purchase at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News.

“The market is very nervous” ahead of the Fed’s decision, Yingxi Yu, an analyst at Barclays Capital in Singapore, said today by phone. A lower-than-expected spending program may boost the dollar and weaken copper prices briefly, she said.

Copper increased 14 percent this year as demand gathered pace in China, the world’s largest user, metal stockpiles shrank and the dollar weakened. Manufacturing activity picked up last month in the U.S., China and Europe, suggesting consumption for metals will remain robust, Stefan Graber, an analyst at Credit Suisse in Singapore wrote today in a report.

“Copper is very strong from a fundamental point of view,” said Barclays’s Yu. Stockpiles monitored by exchanges in Shanghai, London and New York dwindled 21 percent this year.

The World bank, while recommending China to raise interest rates further to curb inflation, said in a periodic report released today the Asian nation’s economic prospects remain “sound,” and boosted its estimate for China’s growth this year to 10 percent from a June forecast of 9.5 percent.

Chile Unions

A potential strike at the Collahuasi mine in northern Chile is also supporting copper prices, Mark Pervan, an analyst at ANZ Bank Ltd., wrote in a report today. The mine represents 3.5 percent of the world’s output, according to Standard Bank Plc.

A union at Collahuasi told members to prepare for a prolonged strike that may start Nov. 5, it said on its website after rejecting a new wage offer from the company. The mine management will resume talks with workers today, company spokeswoman Bernardita Fernandez said yesterday.

Copper consumption in China, the world’s top user, is estimated to increase by 11.5 percent to 6.8 million tons this year, Yang Changhua, an analyst at Beijing Antaike Information Development Co., said today at the China International Copper Conference in Ningbo. The estimate exceeds the researcher’s previous forecast for 10.7 percent growth.

“The investment stimulus package is still playing a role this year, supporting demand growth,” Yang said, referring to last year’s 4 trillion yuan government spending program to pump up growth during the financial crisis.

Zinc Sale

Aluminum and nickel in London were little changed at $2,426 a ton and $23,690 a ton. Tin increased 0.4 percent to $25,899 a ton, and lead climbed 0.1 percent to $2,493 a ton.

Zinc inventories tracked by the LME expanded almost 30 percent this year to 632,225 tons, according to the exchange’s report, the highest since January 2005. The metal price slipped 3.7 percent this year, the only loser among the six main base metals on the bourse.

China will sell 50,000 tons from state stockpiles in a Nov. 9 auction, the National Development and Reform Commission said in a statement. These reserves were bought from domestic smelters between February and May last year, it said.

“It will be the first public auction of zinc by the government,” Feng Juncong, an analyst at Beijing Antaike Information Development Co., said by phone today, forecasting a drop in prices. “It is probably to help offset reduced production as China is limiting power supplies to smelters.” Zinc fell 0.4 percent to $2,444 a ton,

http://www.bloomberg.com/news/2010-11-03/copper-may-increase-on-expectation-fed-stimulus-measures-may-buoy-demand.html