Metals News
Copper Pares Gain as the Dollar Rebounds, Eroding Metal Demand
smm insight
01:16PM
Dec 7,2009
Source:SMM

LONDON, Nov. 12 -- Copper pared gains to the highest prices this month as the dollar rebounded from a 15-month low, curbing demand for the metal to hedge against inflation.

    The U.S. Dollar Index, a six-currency gauge of the greenback's strength, rose as much as 0.3 percent, erasing an earlier drop. The metal touched the highest price this month after industrial production in China, the world's largest copper user, rose 16.1 percent in October from a year earlier, the sharpest increase in 18 months and a sign of rising demand.

    "It is all currency-related," said Leon Westgate, an analyst at Standard Bank Group Ltd. in London. "With metals mostly range-bound and no real direction, currencies and technical signals will continue to dictate price direction."

    Copper futures for December delivery gained 0.45 cent, or 0.2 percent, to $2.966 a pound on the New York Mercantile Exchange's Comex division. The metal reached $3.0375 earlier, the highest price for a most-active contract since Oct. 30.

    Futures also rose after machinery orders in Japan, the fourth-largest copper user, topped forecasts for September, signaling a strengthening recovery in the world's second-largest economy. Orders climbed 10.5 percent from a month earlier, compared with the median forecast for a 4.1 percent gain in a Bloomberg News survey of 25 economists.

    "The Japanese numbers were better than expected, so maybe there is some light at the end of the tunnel," said Robin Bhar, an analyst at Credit Agricole SA's Calyon unit in London.

    China's Imports

    Copper prices have more than doubled this year, while the dollar index is down 7.6 percent. The metal surged as shipments into China rose to a first-half record.

    Last month, imports of the metal and copper products tumbled 34 percent from September, while inventories climbed at warehouses monitored by the Shanghai Futures Exchange. Imports fell to 263,109 tons last month, the government reported today.

    Industrial production climbed while imports fell, which may help copper prices, Yingxi Yu, a Barclays Capital analyst in Singapore, said today in a report.

    "The release of a strong set of Chinese macro data for October appears to have largely offset a rather more mixed set of metal-specific Chinese data," Yu said. "With evidence of over-importing and rising domestic stockpiles, the drop in October imports can be seen as a healthy development for the months ahead."

    Reserve supplies of copper tallied by the London Metal Exchange are headed for an 18th straight weekly increase. Stockpiles in exchange-monitored warehouses rose 0.8 percent to 397,325 metric tons today, the highest level since May 6.

    Strike Threats

    "If you look at stocks, you get a very bearish picture," Calyon's Bhar said. "On the other hand, supplies are tightening. There seem to be a lot of strike threats."

    Miners have stopped work at sites across North and South America this year in a bid to benefit from higher metal prices.

    In Chile, disruptions include a month-long strike at BHP Billiton Ltd.'s Spence copper mine. Strikes also have occurred this year at sites in Peru and Mexico.

    In Peru, Cia. Minera Antamina SA workers will hold a strike vote today after wage talks at the operator of the world's largest combined copper and zinc mine broke down, union general secretary Francisco Marinas said.

    Antimina produced 382,842 tons of zinc and 358,180 tons of copper last year, according to the Energy & Mines Ministry.

    On the LME, copper for three-month delivery advanced $10, or 0.2 percent to $6,540 a ton ($2.97 a pound). Among other LME metals for three-month delivery, nickel, lead, zinc and aluminum rose and tin declined.

    (Source: Bloomberg) 

 

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