Copper down for third day in a row
Copper rolled losses into a third straight day on Tuesday, hit by weaker-than-expected US retail sales data, persistent concerns about European debt, and scant Chinese purchases that may keep the market on its back foot in the days ahead.
After rallying as much as 15 per cent in the first few weeks of the year to its highest in five months, a widely anticipated correction in copper prices may be beginning, while losses could deepen if data continues to disappoint and China remains a reluctant buyer, analysts said.
“This (rally) was predicated on China coming back after the Lunar New Year holiday and having a big appetite for copper, but that has proven to be wrong,” said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago.
“We could see prices pull back to $US3.55 (per lb) … it’s a pretty important area because that’s where this market broke out in January.”
London Metal Exchange (LME) three-month copper eased $US10 to close at $US8,415 a tonne. Losses extended in after-hours trade to below $US8,400.
Last week, it rallied to a five-month peak at $US8,765.
In New York, the key COMEX March contract fell 2.50 US cents to settle at $US3.8145 per lb, after dealing between $US3.7840 and $US3.8590.
It too touched its priciest level in five months last week at $US3.9895.
Copper bears latched on to data on Tuesday showing US retail sales rose less than expected in January as consumers cut back on car purchases and did less online shopping.
“It all falls back to credit … people are not spending,” said Zachary Oxman, managing director with TrendMax in Encinitas, California.
“It’s going to be reflected in the price of gold, and certainly in a lot of the industrials. Copper’s rally has been too far, too fast on nothing, especially when you see data like this.”
The softer US data added to the bearish tone in place on Monday, when Moody’s warned it may cut its triple-A ratings of France, Britain and Austria, while downgrading several European countries including Italy.
“We’ve been concerned about how fast the (base metals) market rose, and we’ve been saying the market was a little bit overheated,” said RBS Global Banking & Markets strategist Nikos Kavalis, citing weak fundamentals for copper in China, the world’s biggest consumer of the metal.
Industry sources told Reuters on Tuesday China was likely to import less refined copper from the spot market this month and next due to plentiful stocks and weak demand, which were also weighing on Shanghai prices.
Refined copper stocks monitored by the Shanghai exchange stood at 198,202 tonnes as of Friday, their highest level since August 2002.
Betting on longer-term demand for copper, BHP Billiton and Rio Tinto have approved plans for a $US4.5-billion expansion of the massive Escondida mine in Chile, while BHP plans to reopen a US copper mine idled three years ago.
The two miners are already spending billions of dollars expanding output at their Australian iron ore mines to feed Chinese demand, and the push to boost output by 80 per cent at the world’s biggest copper mine underscores their optimism.
“Between Pinto Valley and Escondida, the bottom line is that the industry is more and more confident for a sustainable copper price,” said Terry Ortslan, a mining analyst with TSO & Associates in Montreal, with over 30 years of experience in the industry.
In a Reuters poll in January, the median forecast of analysts showed the copper market deficit narrowing to 12,000 tonnes by the end of 2013 from 101,000 tonnes this year.
Metal Prices at 1857 GMT (0557 Wednesday AEDT)
Metal Last Change Pct Move End 2011 Ytd Pct
move
COMEX Cu 381.20 -2.75 -0.72 343.60 10.94
LME Alum 2214.00 3.00 +0.14 2020.00 9.60
LME Cu 8415.00 -10.00 -0.12 7600.00 10.72
LME Lead 2074.00 -41.00 -1.94 2035.00 1.92
LME Nickel 20150.00 -400.00 -1.95 18710.00 7.70
LME Tin 24300.00 -700.00 -2.80 19200.00 26.56
LME Zinc 2032.00 -43.00 -2.07 1845.00 10.14
SHFE Alu 16120.00 -70.00 -0.43 15845.00 1.74
SHFE Cu* 59940.00 -590.00 -0.97 55360.00 8.27
SHFE Zin 15825.00 -170.00 -1.06 14795.00 6.96
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
After rallying as much as 15 per cent in the first few weeks of the year to its highest in five months, a widely anticipated correction in copper prices may be beginning, while losses could deepen if data continues to disappoint and China remains a reluctant buyer, analysts said.
“This (rally) was predicated on China coming back after the Lunar New Year holiday and having a big appetite for copper, but that has proven to be wrong,” said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago.
“We could see prices pull back to $US3.55 (per lb) … it’s a pretty important area because that’s where this market broke out in January.”
London Metal Exchange (LME) three-month copper eased $US10 to close at $US8,415 a tonne. Losses extended in after-hours trade to below $US8,400.
Last week, it rallied to a five-month peak at $US8,765.
In New York, the key COMEX March contract fell 2.50 US cents to settle at $US3.8145 per lb, after dealing between $US3.7840 and $US3.8590.
It too touched its priciest level in five months last week at $US3.9895.
Copper bears latched on to data on Tuesday showing US retail sales rose less than expected in January as consumers cut back on car purchases and did less online shopping.
“It all falls back to credit … people are not spending,” said Zachary Oxman, managing director with TrendMax in Encinitas, California.
“It’s going to be reflected in the price of gold, and certainly in a lot of the industrials. Copper’s rally has been too far, too fast on nothing, especially when you see data like this.”
The softer US data added to the bearish tone in place on Monday, when Moody’s warned it may cut its triple-A ratings of France, Britain and Austria, while downgrading several European countries including Italy.
“We’ve been concerned about how fast the (base metals) market rose, and we’ve been saying the market was a little bit overheated,” said RBS Global Banking & Markets strategist Nikos Kavalis, citing weak fundamentals for copper in China, the world’s biggest consumer of the metal.
Industry sources told Reuters on Tuesday China was likely to import less refined copper from the spot market this month and next due to plentiful stocks and weak demand, which were also weighing on Shanghai prices.
Refined copper stocks monitored by the Shanghai exchange stood at 198,202 tonnes as of Friday, their highest level since August 2002.
Betting on longer-term demand for copper, BHP Billiton and Rio Tinto have approved plans for a $US4.5-billion expansion of the massive Escondida mine in Chile, while BHP plans to reopen a US copper mine idled three years ago.
The two miners are already spending billions of dollars expanding output at their Australian iron ore mines to feed Chinese demand, and the push to boost output by 80 per cent at the world’s biggest copper mine underscores their optimism.
“Between Pinto Valley and Escondida, the bottom line is that the industry is more and more confident for a sustainable copper price,” said Terry Ortslan, a mining analyst with TSO & Associates in Montreal, with over 30 years of experience in the industry.
In a Reuters poll in January, the median forecast of analysts showed the copper market deficit narrowing to 12,000 tonnes by the end of 2013 from 101,000 tonnes this year.
Metal Prices at 1857 GMT (0557 Wednesday AEDT)
Metal Last Change Pct Move End 2011 Ytd Pct
move
COMEX Cu 381.20 -2.75 -0.72 343.60 10.94
LME Alum 2214.00 3.00 +0.14 2020.00 9.60
LME Cu 8415.00 -10.00 -0.12 7600.00 10.72
LME Lead 2074.00 -41.00 -1.94 2035.00 1.92
LME Nickel 20150.00 -400.00 -1.95 18710.00 7.70
LME Tin 24300.00 -700.00 -2.80 19200.00 26.56
LME Zinc 2032.00 -43.00 -2.07 1845.00 10.14
SHFE Alu 16120.00 -70.00 -0.43 15845.00 1.74
SHFE Cu* 59940.00 -590.00 -0.97 55360.00 8.27
SHFE Zin 15825.00 -170.00 -1.06 14795.00 6.96
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
Comments
Post a Comment