METALS-Copper Rises as Investors Mull Austerity Plans-Shanghai Metals Market

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METALS-Copper Rises as Investors Mull Austerity Plans

Industry News 09:24:32AM May 14, 2010 Source:SMM

NEW YORK/LONDON, May 13 (Reuters) - Copper rose on Thursday, after new austerity steps taken by Portugal and Spain to tackle their debt aided sentiment and encouraged investors to continue to reestablish positions wiped out by last week's sharp sell-off.

Copper for July delivery HGN0 on the New York Mercantile Exchange's COMEX division gained 4.35 cents, or nearly 1.4 percent, to finish at $3.2315 per lb, near the upper end of its $3.1755 to $3.2590 session range.

On the London Metal Exchange, copper for three-months delivery CMCU3 ended at $7,160 a tonne from a prior close of $7,025.

Last week, prices of the metal used in construction and wiring collapsed to their lowest since mid-February -- $6,632.75 a tonne in London and nearly $3.00 per lb in New York -- as European debt contagion fears peaked, triggering a global market sell-off.

"We have seen some turmoil and people might have thought it was overdone on the downside," Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto, said of copper's surprisingly strong showing on Thursday.

Catherine Virga, senior base metals analyst with CPM Group in New York, saw the move as more of a consolidation above the psychological $7,000 level.

"We have had slow builds in LME total exchange open interest since May 10, and that could be evident of some market participants rebuilding positions," she said. "It's helping keep prices supported at around $7,000."

Despite their potential knock on growth, investors found relief in news that Spain and Portugal were taking steps to cut their budget deficits.

"The cuts could potentially slow demand in these particular countries, but I do not foresee any major drop due to these budgets," Virga said.

In the background, concerns over how Beijing may try to curb inflation and cool its economy continued to gnaw at sentiment in metals.

Data this week showed Chinese inflation edged up to an 18-month high in April.

"Inflation is a worry for Beijing, so they might have to slow growth more than they otherwise would want," said Ben Westmore, commodities economist at National Australia Bank.

But he added: "Cooling measures when you are growing at 12 percent and asset
prices are rising strongly are not a bad thing."

INVENTORIES SLIDE
On the plus side for metals were across-the-board falls in LME stocks save for lead. Copper stocks fell 1,225 tonnes to total 485,150 tonnes, while canceled warrants -- material set to leave warehouses -- rose to 19,525 tonnes from 17,000 on May 11.

Canceled warrants in zinc rose 10,400 tonnes to total 25,125 tonnes or 4.41 percent of total stocks, up from just 1.1 percent at the start of last week. Overall zinc stocks remain near their highest since early 2005, however. Zinc CMZN3 ended up $60 at $2,100 a tonne, after earlier hitting a one-week high at $2,181.

"Things to look at in the next few months is the potential for disappointment from the demand side," said Daniel Major, an analyst at RBS Global Banking & Markets. "There has been restocking in Europe but people remain cautious."

"We have started to see some stock drawdowns -- the exception being zinc and lead," he added. "Zinc has been harder hit than the others in terms of the sell-off a few weeks ago ... so maybe this is just catch-up."

Battery material lead CMPB3 closed at $2,060 from $2,044, while tin CMSN3 ended at $17,800 from $17,725.

In other metals, nickel CMNI3 closed at $22,850 from $22,550, while aluminum CMAL3 ended at $2,170 from $2,128, after earlier touching a one-week peak at $2,180. Underpinning the two metals was news that South Korea had issued tenders to buy a total
of 6,000 tonnes of primary aluminum ingot and 300 tonnes of nickel cathode.
 

METALS-Copper Rises as Investors Mull Austerity Plans

Industry News 09:24:32AM May 14, 2010 Source:SMM

NEW YORK/LONDON, May 13 (Reuters) - Copper rose on Thursday, after new austerity steps taken by Portugal and Spain to tackle their debt aided sentiment and encouraged investors to continue to reestablish positions wiped out by last week's sharp sell-off.

Copper for July delivery HGN0 on the New York Mercantile Exchange's COMEX division gained 4.35 cents, or nearly 1.4 percent, to finish at $3.2315 per lb, near the upper end of its $3.1755 to $3.2590 session range.

On the London Metal Exchange, copper for three-months delivery CMCU3 ended at $7,160 a tonne from a prior close of $7,025.

Last week, prices of the metal used in construction and wiring collapsed to their lowest since mid-February -- $6,632.75 a tonne in London and nearly $3.00 per lb in New York -- as European debt contagion fears peaked, triggering a global market sell-off.

"We have seen some turmoil and people might have thought it was overdone on the downside," Bart Melek, Global Commodity Strategist with BMO Nesbitt Burns in Toronto, said of copper's surprisingly strong showing on Thursday.

Catherine Virga, senior base metals analyst with CPM Group in New York, saw the move as more of a consolidation above the psychological $7,000 level.

"We have had slow builds in LME total exchange open interest since May 10, and that could be evident of some market participants rebuilding positions," she said. "It's helping keep prices supported at around $7,000."

Despite their potential knock on growth, investors found relief in news that Spain and Portugal were taking steps to cut their budget deficits.

"The cuts could potentially slow demand in these particular countries, but I do not foresee any major drop due to these budgets," Virga said.

In the background, concerns over how Beijing may try to curb inflation and cool its economy continued to gnaw at sentiment in metals.

Data this week showed Chinese inflation edged up to an 18-month high in April.

"Inflation is a worry for Beijing, so they might have to slow growth more than they otherwise would want," said Ben Westmore, commodities economist at National Australia Bank.

But he added: "Cooling measures when you are growing at 12 percent and asset
prices are rising strongly are not a bad thing."

INVENTORIES SLIDE
On the plus side for metals were across-the-board falls in LME stocks save for lead. Copper stocks fell 1,225 tonnes to total 485,150 tonnes, while canceled warrants -- material set to leave warehouses -- rose to 19,525 tonnes from 17,000 on May 11.

Canceled warrants in zinc rose 10,400 tonnes to total 25,125 tonnes or 4.41 percent of total stocks, up from just 1.1 percent at the start of last week. Overall zinc stocks remain near their highest since early 2005, however. Zinc CMZN3 ended up $60 at $2,100 a tonne, after earlier hitting a one-week high at $2,181.

"Things to look at in the next few months is the potential for disappointment from the demand side," said Daniel Major, an analyst at RBS Global Banking & Markets. "There has been restocking in Europe but people remain cautious."

"We have started to see some stock drawdowns -- the exception being zinc and lead," he added. "Zinc has been harder hit than the others in terms of the sell-off a few weeks ago ... so maybe this is just catch-up."

Battery material lead CMPB3 closed at $2,060 from $2,044, while tin CMSN3 ended at $17,800 from $17,725.

In other metals, nickel CMNI3 closed at $22,850 from $22,550, while aluminum CMAL3 ended at $2,170 from $2,128, after earlier touching a one-week peak at $2,180. Underpinning the two metals was news that South Korea had issued tenders to buy a total
of 6,000 tonnes of primary aluminum ingot and 300 tonnes of nickel cathode.