Copper hit successive record highs on Monday, boosted by economic prospects for top consumer China, and supply concerns that could propel prices even higher. Benchmark copper on the London Metal Exchange finished at $9,220, from $8,980 at the close on Friday. The metal used in power and construction earlier peaked at $9,235.25 a tonne.
-- Goldman Sachs sees copper above $11,000 in 1 year
Copper's gains also boosted other metals, with nickel and lead edging to one-month highs. "Obviously the China outlook is helping copper, but more than a general story it's very much a (fundamental) copper story," said BNP Paribas analyst Stephen Briggs. Base metals have reacted positively to Chinese import data out last week and the fact Beijing has not raised interest rates despite climbing inflation.
Investors have been watching closely for any policy moves that would dampen demand in the world's top copper consumer. Import data from China, which last week showed strong numbers after a slump in October and the launch of physically-backed exchange-traded products (ETPs) on Friday have raised expectations for demand but also worries over potential price distortions.
These factors, against a mine supply shortfall could propel the metal to new peaks in the months ahead, analysts say. "We maintain our 12-mo ahead copper price forecast of $11,000/mt and believe that prices could spike substantially above these levels, most likely in late 2011," said Goldman Sachs in a research note on Monday. However, MF Global analyst Ed Meir noted the risk of a correction was growing. "We still believe some trouble could lie ahead, as a rate rise will have to come through sooner rather than later, triggering a modest correction in a number of already overheated commodity markets," said Meir in a research note.
For Tuesday markets are watching the US Federal Open Market Committee meeting where any moves on monetary policy or modulations in tone could prove the next major touchstone for metals, if they impact the dollar. A stronger dollar makes commodities more expensive for holders of other currencies. At the end of the second day of trade, shares in ETF Securities' physical copper ETP ended at $46.4..
ETFS physical nickel prices closed at $122.14 while the tin ETP finished at $129.15 per share. Investor demand is seen as one driver behind metals prices, sucking up available copper supply in particular. These worries have pushed the metal into a $47 a tonne backwardation - premium for cash material over the three-month contract - compared with a discount of $20 a tonne in late October.
Investors also eyed a dominant position controlling between 50 and 80 percent of cash warrants for copper, subject to LME lending guidance. There was also a dominant position of 50-80 percent on nickel. In zinc LME stocks, a large warranting of 25,875 tonnes was registered in New Orleans, helping boost total inventories by 25,650 tonnes net to 656,375 tonnes, the highest in six years.
Zinc wound up at $2,320 from $2,274 a tonne. Zinc's cash discount to three months contract reached almost parity on Friday, signifying a lack of available inventory, although it has since slipped a little. Aluminium ended at $2,330 versus Friday's close of $2,308 a tonne. Stainless steel-making ingredient nickel closed over two percent higher at $24,530 from $23,980 a tonne, having hit its highest in one month at $24,672. Tin traded at $26,150 from $25,800 a tonne. Battery material lead ended at $2,440 versus $2,390 a tonne, having also edged to a one-month top of $2,451.
Comments
Comments are closed.