Copper futures touched three-week highs in Shanghai on Monday, tracking a surge in London toward a record high on weakness in the US dollar after a poor employment report. The June copper contract, the most active on the Shanghai Futures Exchange, closed up nearly one percent from Thursday at 66,760 yuan ($9,517) a tonne.
Shanghai markets were closed on Friday. Copper for delivery in three months on the London Metal Exchange rose $20 to $8,680, after having gained 1.2 percent on Friday. "Shanghai copper prices are likely to rise further in the week to catch up the gap with LME metal," said analyst Cai Luoyi at China International Futures. He said LME copper should touch new highs unless bearish fundamentals emerge.
The gap between London copper and the Shanghai market widened to 4,425 yuan from 3,777 yuan on Thursday, including Chinese value-added tax, enough to prompt some merchants to export metal, traders said.
A larger-than-expected drop in March US non-farm payrolls saw investors returning to the familiar short dollar-long commodity strategy, anticipating further aggressive rate cuts by the US Federal Reserve. Markets have priced in a 64 percent chance of a 25 basis point cut to 2 percent and a 36 percent chance of a greater reduction when the Fed holds its April 29-30 policy meeting.
Worries about supply are also underpinning prices. LME stocks rose 2,575 tonnes to 115,150 tonnes on Friday, showing their first weekly rise since mid-February, with more than 2,000 tonnes going into warehouses in South Korea and Singapore. Shanghai stocks rose 4.7 percent to 58,195 tonnes in the week ended on Wednesday.
But the two exchanges together only hold enough material to supply the world for around 3 days. "The red metal continues to find further support from supply problems in Chile.
The Chilean government announced that the likelihood of power rationing remains," Standard Bank's Walter de Wet said in a report. Chile will import 5-10 percent more diesels in 2008, state Oil Company ENAP said on Friday, with consumption expected to spike in the coming winter months. The fuel will be used to generate electricity amid a shortage of natural gas.