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(REUTERS) Copper steady, inventory rise weighs

Copper steady, inventory rise weighs
Fri Sep 11, 2009 10:14am GMT
By Humeyra Pamuk

LONDON (Reuters) - Copper was steady after an uncertain start on Friday, vacillating between investors who fret prices have gone too high despite weak demand fundamentals, and a weak dollar which gives a boost to metal prices.

The copper price has been moving within a $500 range since the begining of August as the market worries over uncertainities about the pace of the recovery and prices have become prone to a correction after more than doubling since the start of the year.

Copper for three months delivery on the London Metal Exchange was at $6,318 a tonne by 0952 GMT, versus $6,294 a tonne on Thursday.

"There's a lot of good news (already) in that copper price, it has risen a lot," said Jesper Dannesboe, senior commodity strategist at Societe Generale. "But as long as the euro/dollar is above $1.45 copper will hold onto its gains."

The dollar fell to a one-year low against a basket of currencies, making industrial metals cheaper for local currency holders.

"We should get a correction in the prices since stocks are still rising and they're rising at a decent pace," Dannesboe said.

Inventory data is highlightintg scarce demand. Copper stocks at warehouses monitored by the Shanghai Futures Exchange shot up 10,288 tonnes to 97,396 tonnes this week from the previous week, the highest level in more than two years with the rise far bigger than market expectations.

On the LME, copper stocks have risen nearly 25 percent since early July to stand at around 318,000 tonnes.

END TO RESTOCKING

Moreover, China's August imports of unwrought copper and products fell 20 percent from July, despite industrial data surprised on the upside in August.

"There is a feeling that the restocking process may be coming to an end. We are at a point now where industrial production is very strong but many manufacturers are well-stocked and have slowed their purchases," said Ben Westmore, commodities economist at National Australia Bank.

Traders will also look out for macroeconomic data from another major copper consumer, the United States, due later on Friday.

Lead extended falls from the previous session, when it tumbled more than 13 percent and touched its lowest in two weeks following a report by China's state-run research body Antaike saying the country's refined lead surplus is expected to grow this year and widen further in 2010.

The battery material was last at $2,058 a tonne versus $2,120 a tonne on Thursday. Aluminium was almost unchanged at $1,855 versus $1,854.

Steel making ingredient nickel was at $17,150 a tonne versus $17,200 a tonne, while zinc was down at $1,896 a tonne from

$1,920.

Tin edged higher to trade at $14,400 from $14,150.

The backwardation -- premium for cash material over three months delivery -- has widened to $555 a tonne. LME data showed a dominant position holding 50-80 percent of the stock warrants.

"Somebody's holding a large part of the stocks...which is troubling other investors as there could be a shortage of material," an LME trader said.

Labels: COPPER

posted by MrK @ 3:45 PM