Comex Copper Rises As Demand Hope Trumps EU Worries

Nov 14, 2011 NEW YORK (Dow Jones)--Copper futures rose on Monday, as hopes for steady Asian demand for the industrial metal outweighed fading optimism about the financial stability of the euro zone.

The most actively traded copper contract, for December delivery, rose 2.45 cents, or 0.7%, to settle at $3.488 a pound on the Comex division of the New York Mercantile Exchange.

Copper futures are sensitive to the economic outlook because of their widespread uses in construction and manufacturing, and the market has largely been held captive by the European debt crisis in recent weeks. The worry for some copper traders is that a European credit crunch would dent copper demand enough to push the market into a surplus, potentially weighing on prices.

Futures rose for the first time in six sessions on Friday as new political leaders in Italy and Greece were expected to take decisive steps to stem the debt crises there. That optimism faded a bit on Monday, with the euro, European and U.S. equities markets slipping, but copper clung to gains on signs that demand would hold up better outside the troubled currency union.

While EU concerns "are likely to continue to overhang the market in the near term," growth from emerging markets and supply constraints suggest higher prices in 2012, Goldman Sachs analysts said Monday in a note. "We continue to recommend establishing long positions in copper, especially on sentiment-driven short-term dips."

Strong economic growth data from Japan, last year the world's fourth-largest consumer of the metal, helped push prices higher on Monday. The country's gross domestic product grew 6% during the third quarter, an unusually brisk clip for the developed world as many countries continue to struggle from the effects of the global financial crisis.

Codelco, the world's top copper miner by output, has offered copper premiums for 2012 delivery to Chinese consumers at rates similar to this year, traders said, evidence of a bullish demand outlook for the world's top consumer.

"They think Chinese appetite will remain strong next year, otherwise they could have lowered [the premium] to attract more buyers," said a Shanghai-based trader that buys from Codelco.

Chile's state copper commission, Cochilco, published a poll showing that local mining analysts expect copper prices to average $3.62 a pound next year, 10% lower than their August forecast, but still high historically.

"The lower prices outlook shows analysts have incorporated the possibility of a recession in the euro zone and slower Chinese growth as a result of reduced demand in the U.S. and Europe," Andres McLean, an executive vice president with Cochilco, said in a statement.

Copper settlements (ranges include electronic and pit trading):
Nov $3.4855; up 2.35 cents; Range $3.4825-$3.5170
Dec $3.4880; up 2.45 cents; Range $3.4710-$3.5855