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BASE METALS: Copper Recovers After Selloff, Ahead Of Fed
Sep 22,2011 10:08CST
industry news
Source:SMM
Copper futures rose as investors saw a bargain in the metal's slide to 11-month lows, while others bet the Fed policy announcement later Wednesday would lift growth-sensitive assets.

Sep 21, 2011 NEW YORK (Dow Jones)--Copper futures rose as investors saw a bargain in the metal's slide to 11-month lows, while others bet the Federal Reserve's policy announcement later Wednesday would lift growth-sensitive assets.

The most actively traded copper contract, for December delivery, rose 3.85 cents, or 1%, to $3.764 a pound on the Comex division of the New York Mercantile Exchange.

The most-active contract Tuesday fell to its lowest ending price in almost a year, under pressure from declining expectations for global growth and worries that Europe's debt crisis may freeze credit markets. The benchmark contract fell 11% this month through Tuesday, and the declines were enough to draw some cautious buying to the market Wednesday.

Prices were also supported ahead of the conclusion of the Federal Open Market Committee's two-day meeting. The central bank is widely expected announce some stimulative measure to prop up the flagging U.S. economy, with Fed watchers singling out the likelihood that the bank will sell short-term bonds and buy longer-term investments.

The FOMC policy statement is expected at 2:15 p.m. EDT.

Any moves by the Fed to encourage economic activity could boost demand for growth-sensitive assets such as copper, market participants say. The metal is particularly sensitive to the growth outlook because of its widespread uses across industries.

Citing a tempered growth outlook, BNP Paribas Wednesday cut its price forecast for copper and other industrial metals. The investment bank reduced its copper price expectations for 2011 by 2.3%, to about $4.20 a pound. The bank sees prices next year averaging $4.15 a pound.

"Prices have been shielded by the fact that demand growth is driven more by emerging nations than beleaguered developed countries," BNP analysts said in a note.

Expanded Chinese trade data for August suggest that apparent copper consumption in the world's top consuming country hit a record high in August, analysts with Barclays Capital said in a note. Imports were likely boosted, analysts said, as Chinese buyers took advantage of the steep dip in prices since July.

Meanwhile, Freeport-McMoRan Copper & Gold Inc. (FCX) said its production would be hurt by the ongoing labor dispute at its Grasberg gold and copper mine in Indonesia. A 30-day strike by unionized miners began last week, limiting mining, milling and shipping activities, the company said. The hit to copper output is estimated at 3 million pounds for every day of the strike, Freeport said in a statement.

The hit to Freeport's revenue could be as much as $19 million a day, analysts with Citi said in a note.

 

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