Bulletins
MARKET COMMENTARY
In July, the copper price traded in the wide range between $9,350-$9,900 a metric ton and monthly average went up 6.5 percent to $9,619. After the decleration of US debit limit increasing, all metals started to go down except precious metals. Copper decreased from $9,700 to $8,446 deep level of the year.
LME copper steadied today, after dropping more than 2 percent in the previous session as lingering worries about euro zone debts and lacklustre U.S. data continued to weigh on sentiment. Three-month copper on the London Metal Exchange CMCU3 edged up 0.4 percent to $8,805 a tonne, after falling as low as $8,700, the lowest since Aug. 11.
"The LME copper market seems to be taking a pause to digest yesterday's global rout," said Jinrui Futures analyst Zhao Kai. "I think if ShFE copper doesn't fall below 65,500 yuan in the near term, there may be some upside soon," he added.
European stocks are slated for another fall on Friday after Asian stocks slumped on growing fears the U.S. economy was sliding into recession and as some European lenders faced short-term funding strains, raising fears of a systemic banking crisis on the continent. “Copper is still range-bound today, with support seen at $8,500 on the LME. Copper did not fall by that much overnight despite a rout in stocks, which shows that there is a bit of disconnect between base metals and equities now,” CIFCO Futures analyst Zhou Jie. “But when the macroeconomic environment is bearish, copper will move towards its support, and when things calm down, it’ll move towards its resistance level of $9,000 again.”
Gold jumped to a record high and oil fell on Friday on mounting worries the U.S. economy may slip into recession and as Europe's debt crisis pressured short-term funding markets, pushing investors out of riskier assets. Data on Thursday showing factory activity in the U.S. Mid-Atlantic region fell to the lowest level since March 2009 when the world's top economy was in recession fanned fears the U.S. economy could shrink again, pummeling global equities and boosting the appeal of safe-haven assets like gold. Adding to the global uncertainty, some European banks have started paying higher rates for U.S. dollar loans, raising fears the euro zone debt crisis could infect the financial system.
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In June, the copper price was steady in the tight range between $8,900-$9,200 a metric ton until acceptance of Greece austerity plan. After the decleration of this plan, the metal prices started to increase to the highest levels of June and the copper month average went up 0,1 percent to $9,045.
In July copper dropped for a third day in London on concern that Greece’s debt crisis may spread and as the Chinese government intensified property curbs, possibly reducing demand in the largest consumer of the metal. The metal for three-month delivery fell as much as 0.9 percent to $9,480 a metric ton on the London Metal Exchange and traded at $9,520. Copper for September delivery on the Shanghai Futures Exchange closed 0.5 percent lower at 71,130 yuan ($10,989) a ton.
“Worries over the European debt crisis linger, especially whether it will spread further, which is weighing on the markets,” said Wang Ning, an analyst at Xiangyu Futures Co. European finance ministers revived the prospect of bond buybacks to ease Greece’s plight, struggling to contain the debt crisis as investors pounded Italy, the continent’s third-largest economy. Prodded by investors and the European Central Bank, the euro’s guardians said a bailout fund set up last year may be used to buy bonds in the secondary market or enable Greece to retire its debt at a discount. They offered another cut in rates on its emergency loans.
In China, Shanghai Mayor Han Zheng said the city will start a trial to cap prices of newly built residential properties in planned urban areas in Pudong New District in the second half of this year, the Xinhua News Agency reported. “If the property market feels further pressure from the government, it is not good for base metals demand,” Wang said. China’s Shanghai Composite Index, which tracks the bigger of the country’s stock exchanges, closed 1.7 percent lower at 2,754.58. The Dollar Index, which tracks the currency against six trading partners, climbed as much as 0.8 percent.
In Chile, contract workers at Escondida mine ended a strike yesterday after reaching a collective labor agreement, union umbrella group Federacion Minera said. Workers at Codelco, the world’s largest producer, held the first companywide strike yesterday in 18 years to protest planned job cuts as management revamps century-old mines in northern Chile. Mining Minister Laurence Golvorne said the government expected the strike to end as planned and production will resume from today. In Indonesia, Freeport-McMoRan Copper & Gold Inc. said it reached an agreement with a union to end a strike at its Grasberg mine that began July 4 and caused the suspension of copper mining and processing. The workers will report to their positions tomorrow, Eric Kinneberg, a spokesman for Freeport, said yesterday.
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After decreased to $ 8,503 a tonne in May, copper trimmed its losses during the month and finished above $ 9,000 a tonne, helped by expectations of higher demand from top consumer China, outweighing U.S. jobless claims data that signalled further slowing in the U.S. economy. Today benchmark copper on the London Metal Exchange was $9,024 a tonne at 1603 GMT, from $9,045 a tonne at the close of yesterday. The monthly average also went down 5.9% to $ 8,927.
The metal used in power and construction was also supported by news that nearly half of the contractors in a strike that halved output at the world's No. 5 copper mine, El Teniente in Chile had ended the stoppage. The metal fell to a session low of $8,932 after data showed jobless claims rose unexpectedly last week, and the European Central Bank's Jean-Claude Trichet signalled an interest rate rise is probably only a month away. "The jobs data was a little worse than expected, but I don't think that's a major surprise, we are definitely slowing down and we are going to start seeing poorer numbers over the next few weeks," MF Global analyst Edward Meir said.
"The other shoe will drop tomorrow when we get the Chinese numbers." China, which accounts for about 40 percent of global copper consumption, releases trade data on Friday. Its refined copper imports have slumped this year, but some market participants think underlying demand is still intact. "Base metal prices and especially copper will be supported by Chinese import data, which should be better given the sharp destocking over the last couple of weeks in Shanghai," said Daniel Briesemann, analyst at Commerzbank.
Behind predictions of higher imports are copper stocks in Shanghai bonded warehouses, which are said to have fallen by about 200,000 tonnes from April to between 350,000 and 500,000 tonnes now. "It looks like China is going to need more copper very soon, those stocks will need to be replenished," a LME trader said.
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Copper prices rebounded on 09th May, helped by a weaker dollar and as investors said last week's commodity selloff was overdone, especially in light of positive U.S. jobs data. Copper for delivery in three months on the London Metal Exchange rose 1.1 percent to $8,920 per tonne by, after touching $8,657.50 in the previous session, it’s lowest since Dec. 3.
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When we came to the second week of January, copper opened the week on the downside the rebounded to level off at 9,620 $/ton. Key factors driving prices included European Debts Crisis and Chinese demand. All investors, traders, and analysts were focused on debt auction in Spain, Italy, and Portugal. Chinese foreign trade figures for December showed that copper import shrank 0, 8 percent in 2010.
London copper futures rallied to a record at $10,000 a tonne on 3rd of February, buoyed by bullish chart patterns and positive fundamentals stemming from optimism about China and the United States, which will push demand well above supply.
"Copper is very reluctant to test the waters above $10,000. Every time we get near, we recoil. We need something to kick us up a gear. That for now looks like it may have to come from the dollar, or U.S. data," a trader in Sydney said. On the other hand, the dollar rose versus the euro at $1.3798, trading short of a 2-1/2 month high.
Unrest in Egypt, after pro-government supporters clashed with protesters with deadly results, could help lift the greenback's safe-haven appeal, and cap the upside for many commodities. Trade was thin with many Asian markets closed for holidays some 560 lots of copper done, a quarter of the usual for the time of day, while winter weather in the United States may deplete the ranks of traders later in the day.
Underlying fundamentals for copper are positive, with analysts looking at a supply deficit of 800,000 tonnes, twice the amount of copper currently held in LME warehouses. But investors are concerned that copper's rally up 66 percent since June last year, has run ahead of itself. "Copper will be in short supply later this year and into 2012. The big deficits analysts expect will put pressure on stockpiles, but right now the market is pretty easy. Spreads are not particularly tight and copper is available at pretty low premiums," the trader said.
Mining companies have failed to keep pace with demand because new reserves are harder to find and metal from ore is declining. Copper supplies may lag behind demand by 822,000 tons this year, more than double last year’s deficit, according to Barclays Capital. With concerns about supply deficit in the market, Goldman Sachs Group Inc. predicted in October that copper would trade at $11,000 a ton in a year, while Standard Chartered Plc forecast in August that the metal may rise to $12,000 in the next two years.
Now, looking ahead into February, the price direction of copper will likely hinge on China’s demand after the Lunar New Year. According to some researchers, traders and hedgers, copper most likely will see upside action in February. At this time, there are strong resistance at $10,050 and support at $9,780.
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At the beginning of December, driving the market was a step in the right direction by the ECB, generally encouraging economic data and a slightly stronger EUR/USD. Base metals raised across the board on 2nd of December, especially copper were gained strongly. Last days of November, the most important subject (speculation) was reported by Wall Street Journal. According to news on Wall Street Journal, speculation abounds about the identity of the participant who controls 80-90% of the cash warrants on the LME at present.
Copper prices rose during the second week of December supported by Chinese buying and a firmer euro, discounting potential Chinese policy tightening and the end of a strike at a big Chilean copper mine. Moreover, on 7th of December copper broke through the psychological $9,000 mark and reached an all time high at $9,044.
The most significant data released by the General Administration of Customs of China on 12th of December. Monthly copper imports unexpectedly rose almost 30 percent in November, rebounding after a sharp fall in October and setting the stage for solid inflows in December too. Despite a significant amount of negative news about European zone debt crisis and the USA economy, copper got support from Chinese data, and hit its new record price at $9.211 a tone on 13th of December. Goldman Sachs added metals prices will diverge to follow their own fundamentals during 2011 as emerging market economies drive ahead and demand recovers in developed countries, pushing copper above $11,000.
As did copper in the market, Crude oil hit the record price in December, 2010. Oil steadied above $91 a barrel on 29th of December ahead of U.S. inventory data expected to show a drawdown in crude and distillate stocks due to severe weather in the world's largest oil user. Bullish money managers have stormed into the oil market, setting a fresh record high for net long crude positions on the New York Mercantile Exchange. When we evaluate the global markets, as everyone knows gold is the biggest winner. Gold gained 28 percent in 2010, and gold at $1,421.40 an ounce rose to record settlement price on 31th of December. London copper increased almost 8 percent in December, 2010 at $9.147 a tonne, when compared to LME average of November 2010. Also, LME (London Metal Exchange) copper futures gained 31 percent in 2010. Copper stocks in LME approved warehouses increased by 19.800 mt or %5, 6 during to course of December.
Now, looking ahead into 2011, the price direction of copper will likely hinge on supply, and mostly China demand, but it also depends on a couple of new market factors emerged just within the last year or so. According to some researchers, traders and hedgers, copper most likely will see a correction in the first quarter with some profit taking after the New Year, followed by some buying on the dip. Then, there would be a pullback in summer followed by a run-up towards the end of 2011.
The current level of resistance is $9,560 and support is $9,150. We are on the lookout for consumer price and industrial production index on 14th of January and other data for 2010.
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"Today's moves are on the back of firm global equity markets, the good economic data we have seen from China and the United States and the weaker dollar," Commerzbank analyst Daniel Briesemann said. U.S. private sector payrolls rose by the most in three years in November, and its manufacturing sector showed growth was intact, adding to a slew of strong manufacturing data from China, India and European economies. The payrolls report lifted investor optimism about the U.S. job market ahead of Friday's government employment report. Worries about nearby copper supplies have pushed the premium for cash material over the three-month contract to around $60 a tonne -- its widest backwardation since October 2008.
A looming deficit in the copper market is expected to push copper prices next year above the record high. Bolstering this outlook, LME copper stocks have fallen steadily since February, last down 2,425 tonnes to 352,425 tonnes -- their lowest since October 2009. "Supply problems will play a major role not only in the short term but in the mid-term as well," Briesemann said. Investors were waiting to see if the European Central Bank will take more measures to calm euro zone debt concerns, when it announces the outcome of its policy meeting. The ECB is under pressure to help the euro zone contain a market retreat from one country after another. Hopes that it will rush through new anti-crisis measures, such as expanding its government bond buying, stabilised the euro and lifted stock markets.
In Chile, union leaders and management at the Collahuasi copper mine prepared to reach an agreement to end the longest strike at a major private Chilean copper mine. "Given the proximity to year-end and ongoing development of Exchange Traded funds, the sector and particularly copper will remain sensitive to supply disruptions and signs of a possible squeeze," Basemetals.com said in a note. Talk that physically backed exchange-traded products in industrial metals are imminent has dominated base metals markets, generating speculation about their effect on prices and demand.
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Gold and crude oil also lost early gains on the dollar's rebound. "The selloff started because the market had gone too far, too fast," said Frank McGhee, head precious metals trader at Chicago's Integrated Brokerage Services LLC. He was echoing some analysts who said the rally in commodities had been overdone since the Federal Reserve said last week it hoped to bolster U.S. economic growth through a new round of monetary easing worth $600 billion.
"We don't see any chance that the United States, euro zone nations, or Japan would pull out of easy monetary policies any time soon, so inflation worries will continue to be a reason for speculative trades." Edward Meir, base metals analyst for MF Global in New York, concurred with that. "We suspect that lingering misgivings about the Fed's QE2 move (second bout of quantitative easing) is also fuelling the general aversion away from paper currencies and into hard assets," Meir said.
Copper fell 1 percent in London on 10th of Nov as the market retreated from near record highs under the weight of a firm dollar, weak Chinese import data and concerns recent commodity price gains were too steep. Three-month copper on the London Metal Exchange fell $88 to $8,770, off the previous session's 27-month high of $8,884, and the record price of $8,940 struck in July 2008. Benchmark third-month Shanghai copper dipped 0.6 percent to 67,290 yuan. China trade numbers came in on the soft side with October's imports of copper and copper scrap both down by about 25 percent from September.
Some of the support for copper prices came from a strike by union workers at Chile's Collahuasi, the world's No. 3 copper mine. The strike headed into its fifth day, with no sign of resolution. The mine's owners said deliveries had not been affected. But industry sources indicated they expected some impact soon on supply from the work stoppage. Worries about copper supplies in the near term pushed the metal into a $5 a tonne backwardation -- a premium for cash material over the three-month contract compared with a discount of $20 a tonne in late October.
London copper increased almost 7.6 percent in October 2010 at $8,292.40 when compared to LME average of September 2010. It has also risen $3,000 approx or 45 percent from June 08 to Nov 09. Standard Bank has raised its 2011 copper price forecast by $300 per tonne to $8,200 and maintained its predictions for higher levels for other metals next year.
The current level of resistance is $8884 and support is $8600.
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