US copper futures surged to a 13-week high on Thursday, after hefty gains in London fuelled a speculative rally in New York which gained momentum after key chart points were breached, traders and analysts said.
"With London being sharply higher in the overnight, that allowed copper in New York to break through resistance today at $2.90 a lb," said James Corridor, president of Liberty Trading Group in Florida, adding that $3.00 will be the next upside target for the market to hurdle. "We have come all the way from $2.40 in a real short period of time, so it will be interesting to see where the commercials feel they want to do some hedging.
We would think that $3.00 to $3.02 might cap the market for a period of time, but then again, the way it has been rallying it's a tough call," Corridor added. Copper for May delivery shot up 16.20 cents or 5.7 percent by the close to $2.9880 a lb on the New York Mercantile Exchange's Comex division, its best settlement since December 19, 2006, after trading a session range between $2.8405 and $2.9930. Final estimated futures volumes reached 7,500 lots, compared with Wednesday's official count at 15,419 lots.
As of March 14, open interest in Comex copper futures grew 1,437 lots to 66,593 contracts. The recent bout of commercial interest has flattened the market's forward curve, transferring the premium to the nearby May contract, which suggests a tightening of the market's fundamentals, analysts said. The May/July spread settled at a 1.50 cent premium from 1.00 cent on Wednesday's settlement.
This renewed commercial interest was mostly seen coming from China, with constructive macro and trade data from the world's largest copper consumer supporting the theory, analysts said. China's industrial output for January and February grew 18.5 percent from a year, the National Bureau of Statistics said on Thursday. Also, contracted imports were seen covering the country's needs until late May, despite a fall in domestic production, although the market could tighten up again in June.
This fall in domestic copper production was seen keeping China heavily reliant in copper imports going ahead. China imported 174,093 tonnes of refined and anode copper and copper alloy in February, preliminary customs data showed. Imports for the first two months hit 321,743 tonnes, up 112.9 percent year-on-year. Meanwhile, manufacturing activity in New York State factories plunged to its lowest level in nearly two years in March, dragged down by a sharp fall in new orders.
Also, higher energy costs helped lift producer prices by a bigger-than-expected 1.3- percent in February, a Labour Department reports on Thursday showed. London Metal Exchange (LME) stockpiles fell by 1,625 tonnes to 196,125 tonnes on Thursday, down from a three-year peak above 216,000 tonnes in late January.
Comex stocks were unchanged at 36,435 short tons on Wednesday. LME three-month copper closed $310 higher at $6,530 a tonne from Wednesday's kerb close and up 7 percent since the start of March. Edward Meir, metals analyst with Man Financial, noted two consecutive closes above $6,400 could propel the market to the $6,800-$7,000 level.
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