Copper may take a beating in Q2

MUMBAI: Market watchers feel copper could be ruling at its highs at present and may become bearish in the second half of 2008. The latest data released by International Copper Study Group (ICSG) indicates that there would be a surplus in copper availability of close to 80,000 tonnes in 2008. Projections for 2009 are far higher at 4.3 lakh tonnes. Copper prices have rallied significantly during the last three years. Prices have been moving in a wide range since last year, but the cash premiums on the metal remained stagnant.

���This implies that volatility was at its highest levels during this period, indicating that underlying demand for the metal was high despite the volatility,��� said Anand Rathi Commodities��� Navneet Damani. He said the current market condition however shows a different picture and the premiums have started to shrink. This shift in premiums also suggests some inherent weakness in the recent rally, and gives a clue that the current movement might not be driven by demand but by funds.

Further, the price of copper is heavily influenced by Chinese buying and the Chinese market is very well-supplied. With Beijing Olympics around the corner, the demand from China is waning. However, going by past records, there is a hint that the overall bullishness may not taper. According to Kotak Commodities��� Dharmesh Bhatia, there has been a reverse trend in a particular pattern. ���A breakout is seen above the long-term trend line at $8,050,��� he said. In the long-term trendline, there have been three occasions in the last three years when the price had faced strong resistance and failed to go past the line.

On March 17, copper crossed the previous high of $8,880 but was unable to close above it. The price could test levels of $8,815 - $8,935 in the near term. ���Beyond $8,935 prices could go as high as $10,800,��� Mr Bhatia said. On the other hand, copper should fall below a support level of $8,050 per tonne in order to test lower levels.