Shanghai copper gains

Shanghai copper edged up on Monday and London futures were within striking distance of record highs, shrugging off gloomy US data last week as investors continue to look for returns in a shaky economic environment. The May copper contract, the most active on the Shanghai Futures Exchange, rose 410 yuan to 69,210 yuan ($9,732) a tonne.
Copper for delivery in three months on the London Metal Exchange rose $5 to $8,450 a tonne, just over 4 percent short of the record $8,800 high struck in May 2006. "With oil and gold at high levels, it seems fresh money is still entering commodities and maybe we'll see new record highs in copper," a dealer in Shanghai said.
"If the market takes out a new contract peak, it's hard to say where the next target will be," he said, adding that dealers will be looking for round numbers. The Reuters-Jefferies CRB Index, which tracks 19 commodity futures, rose almost 12 percent in February, its biggest monthly gain since 1974, supported by record oil and gold prices and strength in base metals.
Dealers said options expiry on Wednesday could add some spice to proceedings during London dealing. "That is likely to support copper prices in Shanghai," analyst Wang Zheng at Fubao Metals said. Strike prices ranged between $2,500 to $10,000, with traders saying most of the open interest is around the $8,000 to $8,600 marks.
Traders noted that the differential between London and Shanghai copper prices was at its widest in several years, suggesting copper could start to flow out of China in coming weeks.
"The arbitrage is potentially starting to favour exports, That doesn't automatically mean that we will see metal coming out of China, but the price ratio is the lowest it's been for several years," a second dealer in Shanghai said. "Traders will start to look at buying Shanghai and selling London and in theory, we should see a slowdown in imports."
Last week's testimony by US Federal Reserve Chairman Ben Bernanke, in which he warned some small US banks could fail and signalled more rate cuts might be needed, re-ignited the fears of recession that made January such a bloodbath for equity markets.
The dollar fell as low as 73.551 against a basket of six major currencies, taking it to the lowest since the index was started in 1973. It ploughed below 103 yen as a sell-off in Wall Street last on Friday spurred an unwinding of carry trades.
Aluminium eased $6 to $3,100, while tin was quoted $75 weaker at $18,675, not far from Thursday's record $18,900 on a renewed crackdown on Indonesia's tin industry. Zinc ticked up $15 to $2,755. In the latest mining industry tie-up, Australian miners Oxiana Ltd and Zinifex Ltd have agreed to an A$11.5 billion ($10.7 billion) merger deal.