Copper eases; capped near term by China policy risk
Copper prices fell in London and Shanghai on Tuesday, easing alongside oil and grains as the potential for Chinese monetary policy tightening continues to drag prices off recent highs.
Three-month copper on the London Metal Exchange fell 0,8% to $8 580 a ton by 0335 GMT, reversing the previous session’s rally of 0,4%. Shanghai copper fell 0,1% to 64 850 yuan, sliding after an early rally to 65 590 yuan.
LME copper hit a record high of $8 966 last Thursday, but ended last week down 0,5% after steep losses on Friday on market talk of an imminent Chinese interest rate rise following a surge in inflation to a more-than two-year high.
“The October numbers show clear signs that inflationary pressures are building and more Chinese rate hikes are due. Our economists expect a hike in the benchmark rate within the next month,” said Barclays Capital analyst Yingxi Yu.
“That is weighing on sentiment for the moment, but longer term it won’t have an impact on commodity demand.”
Barclays Capital forecast a copper deficit of a little under 800,000 tonnes next year and for spot prices to average $9 550.
Reflecting the tightening outlook, Chile’s Codelco, the world’s top copper producer, will raise annual physical copper premiums for Japanese and South Korean buyers by 31% in 2011, trading and smelter officials said.
Consumers in Japan and South Korea will have to pay $98 a tonne above the London Metal Exchange cash price for copper shipments in 2011, up from $75 in 2010, several industry sources said.
China’s smelters have not started negotiations with Codelco, sources said. Talks are likely to start next week, a trader, who expects a settlement of around $110 to $115 a ton, said.
“The impact of the financial crisis is over, and consumption is back up,” said an official at a Chinese smelter.
Monetary tightening by China has weighed heavily on the metal market since Friday, dragging zinc, nickel and aluminium to multiweek lows.
LME zinc continued its slide, falling as much as 3.1 percent to $2,265, while Shanghai metal dropped as much as 1.7 percent. Prices later recovered, with LME metal at $2,299, and Shanghai paring losses to 0.4 percent to end the morning session at 18,635 yuan.
“A lot of the recent gains in zinc were purely speculative. Market fundamentals are not especially positive and the likelihood of tightening China is forcing a lot of that money out,” a trader in Shanghai said.
LME zinc prices have dropped 12.4 percent since Nov 9. Shanghai futures have lost 12 percent just since Thursday.
Shanghai zinc was expected to extend losses to 17,665 yuan this week based on wave patterns and a Fibonacci projection analysis, according to Reuters technical analyst, Wang Tao, carried lower by strong bearish momentum.
Aluminium fell half a percent to $2,389, but prices in Shanghai rose a modest 15 yuan to 16,810 yuan.
Russia’s UC RUSAL, the world’s top aluminium maker, said it saw prices of the metal at current or higher levels.
Three-month copper on the London Metal Exchange fell 0,8% to $8 580 a ton by 0335 GMT, reversing the previous session’s rally of 0,4%. Shanghai copper fell 0,1% to 64 850 yuan, sliding after an early rally to 65 590 yuan.
LME copper hit a record high of $8 966 last Thursday, but ended last week down 0,5% after steep losses on Friday on market talk of an imminent Chinese interest rate rise following a surge in inflation to a more-than two-year high.
“The October numbers show clear signs that inflationary pressures are building and more Chinese rate hikes are due. Our economists expect a hike in the benchmark rate within the next month,” said Barclays Capital analyst Yingxi Yu.
“That is weighing on sentiment for the moment, but longer term it won’t have an impact on commodity demand.”
Barclays Capital forecast a copper deficit of a little under 800,000 tonnes next year and for spot prices to average $9 550.
Reflecting the tightening outlook, Chile’s Codelco, the world’s top copper producer, will raise annual physical copper premiums for Japanese and South Korean buyers by 31% in 2011, trading and smelter officials said.
Consumers in Japan and South Korea will have to pay $98 a tonne above the London Metal Exchange cash price for copper shipments in 2011, up from $75 in 2010, several industry sources said.
China’s smelters have not started negotiations with Codelco, sources said. Talks are likely to start next week, a trader, who expects a settlement of around $110 to $115 a ton, said.
“The impact of the financial crisis is over, and consumption is back up,” said an official at a Chinese smelter.
Monetary tightening by China has weighed heavily on the metal market since Friday, dragging zinc, nickel and aluminium to multiweek lows.
LME zinc continued its slide, falling as much as 3.1 percent to $2,265, while Shanghai metal dropped as much as 1.7 percent. Prices later recovered, with LME metal at $2,299, and Shanghai paring losses to 0.4 percent to end the morning session at 18,635 yuan.
“A lot of the recent gains in zinc were purely speculative. Market fundamentals are not especially positive and the likelihood of tightening China is forcing a lot of that money out,” a trader in Shanghai said.
LME zinc prices have dropped 12.4 percent since Nov 9. Shanghai futures have lost 12 percent just since Thursday.
Shanghai zinc was expected to extend losses to 17,665 yuan this week based on wave patterns and a Fibonacci projection analysis, according to Reuters technical analyst, Wang Tao, carried lower by strong bearish momentum.
Aluminium fell half a percent to $2,389, but prices in Shanghai rose a modest 15 yuan to 16,810 yuan.
Russia’s UC RUSAL, the world’s top aluminium maker, said it saw prices of the metal at current or higher levels.
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