UPDATE 5-Copper falls on firm dollar, Chinese absent
Thu May 8, 2008 4:04pm EDT
(Updates with New York prices, adds trader comment)
By Anna Stablum
LONDON, May 8 (Reuters) - Copper prices fell to a
one-week low on Thursday as Chinese buyers were
sidelined expecting lower prices and a firm dollar
weighed on sentiment.
Analysts said supply disruption risks and low
inventory levels supported prices, but the metal lacked
fresh impetus to climb higher as China still shied away
from the market.
Copper for delivery in three months MCU3 fell as low
as $8,260 per tonne, its lowest since May 2 and closed
at $8,300, down $130 from Wednesday, when it shed 1.1
percent.
In New York, copper for July delivery HGN8 finished
with a 4.65-cent loss at $3.7875 a lb on the COMEX
metals division of the New York Mercantile Exchange.
July futures fell to their lowest level in a week at
$3.7530 per lb.
Traders in New York said declines resulted when
players continued to unload long positions taken out
during Monday's price spike, along with the absense of
buyers and an increase in LME warehouse stocks.
"We haven't really seen any significant news...In a
situation like that you see forex has a bit of an
influence in the near term," said analyst Sudakshina
Unnikrishnan at Barclays Capital said.
The dollar hit a two-month high against the euro and
a basket of currencies, but then trimmed some of its
losses as the euro recovered after the European Central
Bank left interest rates unchanged. Its president
focused more on inflation.
A stronger dollar makes industrial metals more
expensive for holders of other currencies.
We just don't see any reason for copper to rally from
here. A lot of the negative news has been factored in so
unless you get a further big supply disruption we see it
drifting," analyst Max Layton at Macquarie Bank told
Reuters.
A strike at the world's top copper producer Codelco
has just ended and production is expected to resume on
Friday, but another strike could start in Peru.
Unions at mines throughout Peru are ready to strike
next week to demand better labor benefits, the head of
the country's biggest federation of mining unions and
local union bosses said. [ID:nN06491860]
HOLDING BACK
In terms of underlying demand, analysts say China's
robust appetite remains intact.
"They are just holding back as much as possible from
purchasing in order to get the price down," Layton said,
adding that Chinese demand would pick up at around
$7,500 to $7,800.
So far this year copper has gained 26 percent on
supply disruptions and tight inventory levels. Stocks in
LME warehouses stand at 110,100 tonnes, down 44 percent
this year.
Inventories could fall further, sparking a rally in
copper with prices targeting $10,000 per tonne, analyst
Allan Trench at metals consultancy CRU said.
"The key thing is that copper stocks would have to
fall another 40,000 to 50,000 tonnes from where they are
now -- that would be the real trigger," he said, adding
it was likely as the market was structurally in deficit.
He compared the market to that of nickel, mainly used
in stainless steel, where prices hit a high of $51,800 a
year ago.
"Looking back to how the nickel market looked before
that happened it looks very much like the copper market
now," he said, referring to lukewarm signals from the
physical market, demand growth slowing slightly and many
consumers covered.
Since nickel MNI3 peaked last year, prices have
nearly halved to trade at $27,700, down $800 from
Wednesday.
Substitution from nickel pig iron killed the nickel
rally, but copper had no equivalent, CRU's Trench said.
In other metals, tin MSN3 bucked the falling trend
and was up at $24,500, after matching its record high of
$24,600 set on April 24.
Energy-intensive aluminium MAL3 fell $49 to $2,875 a
tonne on record high oil prices, zinc MZN3 shed $32 to
$2,218, while lead MPB3 was $100 down at $2,320.
(Additional reporting by Carole Vaporean in New York and
Humeyra Pamuk in London; editing by Peter Blackburn)
© Thomson Reuters 2008. All
rights reserved. Users may download and print extracts
of content from this website for their own personal and
non-commercial use only. Republication or redistribution
of Thomson Reuters content, including by framing or
similar means, is expressly prohibited without the prior
written consent of Thomson Reuters. Thomson Reuters and
its logo are registered trademarks or trademarks of the
Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial
Handbook which requires fair presentation and disclosure
of relevant interests.
CANADIAN MINING NEWS
