London Metal Exchange copper jumped above the key $8,000 a metric ton
Tuesday to a seven month high, bolstering the entire base metals
complex, with further gains expected overnight, according to market
participants.
Fund and speculative buying pushed copper prices sharply higher with
market activity heating up once prices broke through $7,900/ton, said a
base metals broker in London. Moreover, a breach of the key $8,000/ton
price triggered a flurry of technical-related buying, the broker added.
LME copper jumped over 3.5% to a seven month high of $8,050/ton before
retreating to a PM kerb of $8,048/ton.
A fall in LME copper stocks by 2,575 tons Tuesday initially supported
prices. LME copper stocks have declined roughly 5% from the start of
April.
Moreover, stronger than expected U.S. housing starts figures were also
very supportive for construction-intensive copper, according to market
participants.
Housing starts increased 0.8% to a seasonally adjusted 1.518 million
annual rate, after jumping 7.6% in February. Economists were expecting a
1.6% drop in the March figure. Building permits, meanwhile, also rose
0.8% last month, against expectations of a 1.4% decline.
Meanwhile, some analysts pointed to ongoing concerns at PT Freeport
Indonesia's massive Grasberg mine as adding support to prices.
As of late Tuesday, Tongoi Papua, a labor group that lobbies on behalf
of Freeport's native employers from Papua, said it refused to hold
discussions with the company as Freeport's top management declined to
grant the group a teleconference. A major sticking point has been the
group's demands on wages and benefits.
Tongoi Papua has said it will hold a peaceful rally involving about
6,000 to 10,000 people Wednesday if its demands aren't met. The Grasberg
mine produces around 1,800 tons of copper and 9,000 troy ounces of gold
a day, but traders have said the protest isn't likely to immediately
affect production.
Nevertheless, traders said the price run-up has been driven by
speculators and not by fundamental news.
"I think Chinese buyers will come in and buy copper overnight following
the strong gains in Europe," a copper analyst said.
According to Edward Meir of Man Financial, copper's next upside target
is $8,200/ton, while good support should be seen around $7,700/ton.
In other metals, zinc and nickel surged on the back of strong copper
gains. Three-month zinc jumped over 5% to a three-month high of
$3,720/ton on fund and speculative buying, while nickel jumped some 4%
to above $48,000/ton.
A jump through the 200-day moving average of $3,635/ton also triggered a
flurry of technical buying, an LME analyst said.
"Funds are just beginning to get out of short positions in zinc, because
there are uncertainties of how much cheap zinc there is coming out of
China going forward," said JP Morgan analyst Michael Jansen.
Low and declining LME nickel inventories have also attracted buyers. LME
nickel stocks are down some 20% since the start of April, according to
LME data.
Meanwhile, three-month tin jumped to a fresh record high of $14,950/ton
on consumer and fund buying amid thin market conditions.
Ongoing supply concerns in Indonesia - which produces roughly one third
of global supply - continue to underpin prices.
Last October, Indonesia closed dozens of small-scale smelters that
together produced about half the country's annual tin output on
allegations they were purchasing tin ore illegally, damaging the
environment and evading taxes.
LME tin inventories are down 10% since the start of April and down 32%
since the start of 2007.
Prices in dollar a metric ton.
3 Months Metal Bid-Ask Change from
Monday PM kerb
Copper 8048.0-8049.0 Up 319
Lead 2015.0-2020.0 Up 10
Zinc 3719.0-3720.0 Up 219
Aluminium 2890.0-2895.0 Up 68
Nickel 48400.0-48500.0 Up 2200
Tin 15000.0-15050.0 Up 475
