Red-hot copper market eyes all-time high

LONDON, Feb 18 (Reuters) – World copper prices jumped more than two percent on Friday to reach a new 16-year peak and inch towards a record high of $3,280 a tonne set in 1989.
“We have not seen the top of this market yet,” Bache Financial minerals analyst Angus MacMillan said of a price surge inspired by cash-rich investment funds pouring money into a red-hot London market.
Three months copper on the London Metal Exchange (LME), the world’s largest non-ferrous market, was at one point up $73 at $3,230, its highest since January 1989, before closing at $3,225.

The latest price spike caught many by surprise after a move in overnight trade through October’s previous cycle high of $3,175 and then $3,224.5 had set technicals signals ringing and triggered short covering.
“It has been driven by fund and CTA (commodity trade advisor) buying, but it is justified by the fundamentals,” Macmillan said. “The simple fact is that there is not enough copper out there.”
A CTA is a U.S.-registered specialist who advises in trading in commodity derivatives.
“We add or subtract to our position on a daily basis,” added a source at a system-based fund. “But the macro funds were buying heavily on Thursday — possibly because they were caught short.”
Copper, widely used in construction and wiring, remained well above Thursday’s official close of $3,157. During 2004, copper rose some 35 percent in a storming bull-market, fuelled by voracious Chinese buying.
Copper has been in short supply for months, but fresh production is being cranked up, and the market is widely expected to move from deficit into surplus in the second half of the year.
“This may be the final spike — the only question is whether the spike lasts a few days or a few months,” the fund source said.
Lead closed up 6.3 percent, or $58, at $981, which was $1 off the day’s high.
“Lead is following other metals. It’s about time as it has resisted the temptation to go higher for so long,” one LME trader said.
Lead touched $1,017 on December 31, its highest since the contract was switched into dollars from sterling in the early 1990s.
Tin rallied $475 to $8,300 after hitting $8,363, its highest since December 23.
Aluminium ended $26 stronger at $1,935, near six-week highs, while zinc was $13 firmer at $1,374 after setting a new 7-1/4-year peak of $1,377.
Nickel was indicated at $15,625/15,670, up $375.
Current high prices represent excellent value for global metal producers, who are recording big profits. BHP Billiton , the world’s biggest diversified miner, earlier this week reported that it more than doubled its first half profits.
On Friday, shares in other leading miners rose, with Rio Tinto rising 9p to 1,747 pence, Anglo American up 8p at 1,348, while leading copper miner Antofagasta added 3p to 1,322 pence.
A weaker U.S. currency has also encouraged overseas investors to buy dollar-denominated copper. The dollar slipped on Thursday as earlier gains inspired by a drop in U.S. jobless claims proved short-lived. (Additional reporting by Cho Mee-young in Seoul, Martin Hayes and Jae Hur in London).
Source: Reuters via Yahoo News Asia

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