Metals flat on low demand, stock support
Base metals traded sideways on Wednesday with critically low stocks supporting the complex and concerns about Chinese demand in the fourth quarter capping prices, traders said.
By TNN |
LONDON: Base metals traded sideways on Wednesday with critically low stocks supporting the complex and concerns about Chinese demand in the fourth quarter capping prices, traders said.
“The price in copper is coming down in response to probably a slowing demand and a very high price,” analyst John Meyer at Numis Securities said.
On Wednesday, copper for delivery in three months on the London Metal Exchange eased 0.3% to $7,410 a tonne in the official rings compared with Tuesday’s close of $7,430.
Chile’s Codelco, the world’s largest copper producer, said the global copper market would stay tight until ’08, but its own production would start to rise from then on.
Rising costs, a softer dollar and healthy demand growth in Asia will keep long-term prices of key industrial metals at much higher levels than in the past, the poll showed. Preliminary statistics out of China showed year-to-date copper imports lower than the same period a year earlier.
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“However, the difference is likely explained by the release of State Reserve Bureau strategic reserves and the import substitution effect of increased deliveries to the domestic market,” a Deutsche Bank report said. If Chinese imports are down by 63% year-to-date one would expect to see a much weaker price profile, ABN Amro’s analyst Nick Moore said.Falling copper stocks in LME-registered warehouses supported the complex, down by 125 tonnes to 113,900 on Wednesday. The tightness was reflected in the premiums for cash metal above three-months prices, also known as backwardation, at $44.5 from $3 in the start of last week.
However, this compares to a backwardation of $175 on May 11, when copper peaked at a record high of $8,800 and the stocks were at similar levels at 114,000 tonnes. The backwardation allows investors to lend metal to the market by selling cash and simultaneously buying three-months contracts and pocketing the difference.
Far forward prices are considerably lower, with copper for delivery in January ’09 some $1,544 lower than the three-month price. In a well-supplied market, far forward prices tend to be higher than nearby prices to reflect interest, insurance and storage costs of metal.
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Nickel was at $30,075/30,100, compared with its previous close at $29,700 and Monday’s record high of $30,250. Lead traded at $1,445 versus the last quote on Tuesday at $1,430/1,435, after reaching a new all time contract high of $1,460, rising 2% on Tuesday. Zinc was higher at $3,700 against $3,685. Aluminium was at 2,555.5 falling 1.1% against previous session’s close of $2,585.
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