Posted on February 5, 2009. Filed under: News And Politics... |


Copper leads metal rally on US data

February 04, 2009

Article from:  Reuters

COPPER led a bullish charge in base metals after a surprise jump in US pending home sales in a battered housing sector.

But rising inventories continued to cloud the metal’s demand outlook.

Pending sales of existing US homes rebounded in December as buyers waded back into the market, lured by lower prices and mortgage rates.

The data drove a sharp rally in the price of copper, a metal used primarily in the power and construction industries, and offered a ray of hope for the troubled US economy.

Copper for March delivery surged US9.10 cents, or 6.4 per cent, to settle at $US1.5220 a pound on the New York Mercantile Exchange’s COMEX division.

KEY COMMODITY PRICES: oil, base metals, gold, livestock and wheat

“I think we’re starting to see a little optimism creep in here and there,” said Michael Gross, futures analyst with in Tampa, Florida.

“It is certainly not outweighing any of the negatives yet, but it is certainly giving us a little bit of hope and that could at least dissuade some of the short sellers for the time being.”

Copper for three months delivery on the London Metal Exchange settled up $US195 at $US3370 a tonne, near the upper end of its $US3190 to $US3390 session range.

“We see people covering their short positions,” analyst Michael Widmer at BNP Paribas said, referring to the rise.

“Yesterday’s data triggered some short covering, but I don’t see a build up of new long positions.”

Yesterday, the Institute for Supply Management’s index of US factory activity rose to 35.6 in January from a near three-decade low of 32.9 in December, above expectations, but still showing the sector was shrinking.

From the auto sector, Ford and Toyota posted a 40 per cent and 34 per cent drop, respectively, in January sales in the United States. The dismal data adds weight to the view that the sector will be a further drag on US output in the current quarter.

Weak demand prospects were reflected in the rise in inventories.

“When the stock data came out, showing another rise in copper stocks, copper gave up some of its gains,” Mr Widmer said. “The fundamentals are still weak.”

Copper inventories on the LME rose 4100 tonnes to 495,300 tonnes, the highest since late 2003, while aluminium stocks grew 28,300 tonnes to a record of around 2.84 million tonnes.

Aluminium ended at $US1405 from $US1390 a tonne.

Reflecting the underlying negative outlook, industrial metal prices will fall by an average of nearly 50 per cent in 2009, the Economist Intelligence Unit said in a statement.

Copper, used extensively in construction, has lost more than 60 per cent since July 2008, when it touched a record high of $US8940 a tonne in London and was trading just above $US4.00 a pound in New York.

“There is an argument that we are basing out and at a certain point we start to see a sideways drift, but I am not sure this is it yet – we might see one more dip before we bottom,” MF Global analyst Edward Meir said, adding that the market will likely remain sloppy, near-term, until plans from Washington about the banking sector become clear.

Zinc, used to galvanise steel, hit a high of $US1177 a tonne but closed at $US1174 from $US1113.50, while battery material lead ended at $US1170 from $US1105.

Tin rose to a high of $US11,050 but closed $US450 higher at $US11,000 while nickel, a key ingredient for stainless steel making, closed at $US11,605 from $US11,330.



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