Copper prices bounded higher by almost 3 percent Wednesday after China raised the value added tax on a range of metal ore imports, but metals across the board were poised for their largest annual falls on record.
China said it would increase the value added tax to 17 percent from 13 percent on a range of imported ores and concentrates on January 1, a move analysts said aims to stabilise domestic metal prices. But traders and analysts warned that new lows could loom for base metals in 2009 as the complex heads for unprecedented losses this year.
"The VAT issue is helpful but there are bigger issues that will come to the fore, such as the magnitude of the demand slowdown within China," said Nick Moore, a commodity strategist at RBS Global Banking & Markets. China is one of the world's top consumers of copper for its burgeoning industries.
Steve Platt of Archer Financial Services in Chicago said demand would be uppermost in the minds of market participants as they ponder whether a recovery is in the cards for 2009. Copper for three-months delivery on the London Metal Exchange rose 2.6 percent to a high of $2,986. It was at $2,930 in ring trading, against $2,910 at the close on Tuesday. The March copper contract on the New York Mercantile Exchange's COMEX division rose 8.95 cents to finish at $1.41 a lb, having traded from $1.314 to $1.4145.
Copper struck a record high of $8,940 a tonne, while aluminium hit $3,380 a tonne, in July, before a global financial crisis deflated demand, punishing prices as a result. LME copper stockpiles rose 2,425 tonnes to a nearly five-year high of 339,775 tonnes, while aluminium inventories grew 26,875 tonnes to 2.33 million tonnes, their highest since September 1994.
Lead, the worst performing industrial metal, dropped 63.8 percent this year. It traded at $925 a tonne, down from the last bid of $954 on Tuesday. Nickel was bid at $10,900 a tonne, up from $10,710, zinc climbed to $1,155 from $1,150 and tin was at $10,100, up from $10,000.
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