New York copper futures may have ended their weeks-long selloff on Friday when bargain hunting near two-month lows turned into a strong short-cover rally that eventually drew new buyers into the spree, leaving prices with huge gains, analysts said.
"Obviously a nice little bounce off yesterday's selloff. We thought prices below that $3.20 mark (on July futures) were going to be viewed as a value after that hard selling.
Below $3.20 (a lb.) we saw some bargain hunting," said David Meger, Alaron Trading metals analyst in Chicago. Traders said many participants On Thursday's selloff ahead of the long US Memorial Day holiday had to scramble on Friday to cover those short positions when prices rose. Both London metal markets and US will be closed on Monday.
Trading will resume on Tuesday. Copper for July delivery closed about 4.40 percent stronger and held those gains in after-hours electronic trade. July ended the floor session 14.00 cents higher at $3.3205 a lb. On the New York Mercantile Exchange's Comex division. Overnight, July copper slid to $3.1650, its cheapest level since April 2 then rose to a high at $3.3225 a lb.
Spot may copper added 14.35 cents to finish at $3.3270, a 4.51 percent gain. Others ended up 9.10 to 14.50. Comex estimated final copper futures volume at 13,610 lots, compared with 16,887 lots at Thursday's close. At May 24, open interest in Comex futures rose 828 lots to 81,638 contracts.
Copper prices have fallen sharply since May 4, leading to broad speculation that economic growth prospects may be slowing and demand for copper waning, especially by the Chinese.
So the rally caught many off guard. Players who thought on Thursday's rout would continue had to cover short positions. Analysts noted that anxiously watched copper inventories at the Shanghai Futures Exchange did not rise as many participants anticipated.
Instead, copper stocks monitored by the exchange slid to 99,027 tonnes this week from 99,556 tonnes previously. The decline in Shanghai stocks was the first sign that the recent selling may have been technical after copper rose in May to its highest level in a year.
"Everyone seemed to be watching those Shanghai stocks and when they didn't increase as people expected that gave a little boost to the market," said Meger, along with other analysts.
Meger said that once July futures shot above $3.25 a lb. in a short-cover rally, some buyers entered the market to take new long positions, and lifted prices to their pre-weekend highs. A two-day work stoppage by mill employees at CVRD-Inco's Voice's Bay nickel mine site in Canada may have had a knock-on effect with copper, adding to the run up.
After copper closed, the workers returned to work and the mill was restarted, a company spokesman said. Copper inventories at London Metal Exchange warehouses dropped 1,975 tonnes on Friday to 134,125 tonnes, providing additional support to the market.
Comex stocks lost 394 short tons to 30,227 short tons on Thursday. London copper for delivery in three months raced up to close on Friday's kerb at $7,272 a tonne, a leap above $7,000 at Thursday's close and $6,952, the April 2 low hit on Thursday.
Comments
Comments are closed.