London Metal Exchange (LME) copper bobbed to six-week highs on Tuesday in light trade, as investors anticipate the return of Chinese buyers after week-long Lunar New Year holidays, analysts and traders said. LME three-months copper ended at $3,142, up $32 from Monday's London late kerb close. The red metal rose briefly to above $3,150, the highest since January 4.
"It looks like we are dressing up (prices) for the Chinese. We expect copper to have one last big spike, up to $3,200 and it seems like it might be happening now," one floor trader said.
Analysts expect Chinese consumers to be buyers when the Shanghai Futures Exchange (SHFE) re-opens on Wednesday, which might provide the impetus for a breach of October's near-16-year high of $3,175 a tonne and even 1989's all-time peak of $3,280.
"Having been closed for a week there could well be pent-up demand and buying interest (in Shanghai)," Standard Bank London analyst Robin Bhar said.
"If Shanghai goes limit up, that will underpin the LME and it will snowball. We are not far off $3,175. Above that is the all-time high of $3,280 hit in January 1989."
The SHFE has a three percent limit, up or down, on daily price moves.
Traders said rising stocks, which had dented sentiment towards copper, would be snapped up by eager buyers.
LME warehouse inventories have risen from a low of 43,475 tonnes in mid-January to 55,725 tonnes after a 275-tonne increase overnight.
Copper's cash/three months backwardation eased to $115/125 from Monday's about $140.
Barclays Capital said in it daily report: "The underlying trend still appears supportive but it still remains the case that participants remain wary about at current high price levels, while the fundamentals and backwardations are discouraging aggressive short-selling also."
The bank said it expected volatile price behaviour to continue with factors such as currency movements having a greater influence than fundamentally justified.
Federal Reserve Chairman Alan Greenspan's semi-annual testimony to Congress on Wednesday and Thursday would also be watched.
Aluminium closed up $15 at $1,870 after rising to $1,875, the highest since January 4 and just an inch below resistance at $1,880.
Zinc was unchanged at $1,328, recovering from early bank-led selling.
Nickel rose $390 to $15,600, and lead fell $2 to $916. Tin indicated at $7,925/7,975 versus $7,950.
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