Copper price hits peak Monday, drops Tuesday
Volatility still highlights the copper market
Tom Stundza -- Purchasing, 11/10/2009 9:28:37 AM
Spot copper matched a 2009 high of $2.98 on Monday when Codelco, the world's top copper miner, raised premium charges for Asian customers in 2010. However, the world spot price on the London Metal Exchange slipped back to $2.95 in trading today because of speculation among traders that demand is weakening in China, the world's largest user.
"There are some worries that there has been a fair amount of metal sitting around, which may just act as a near-term drag in terms of pricing," analyst Charles Kernot at Evolution Securities in London tells Bloomberg. "We are going into a little bit of a quiet period around the turn of the year, so it may well be the case that the price may just drift off."
The run-up came about Monday when Chile's Codelco raised its premium for copper to be delivered at the Japanese port of Yokohama to 3.4¢/lb in 2010, and to 3.35¢ for South Korean buyers, in anticipation of rising demand in parts of Asia. A Reuters report says these increases for Japan and South Korea were equivalent to around 15.5% of 2009 premium levels of 2.8¢/lb.
"The Chileans are selling more and more of their mined copper to China, India and Korea and it's a clear example of how much that region is powering ahead, while Europe and the U.S. are not growing very quickly," says Calyon analyst Robin Bahr in London.
Further support for the copper price came from a struggling dollar, which fell to a 15-month low Monday against a basket of currencies after a weekend G20 agreement to keep emergency stimulus spending in place indicated global interest rates will remain low. A softer dollar typically lifts dollar-denominated metals by making them cheaper for holders of other currencies.
Analyst Edward Meir at MF Global in New York says that market fundamentals behind copper and other nonferrous metals "don't justify lofty valuations, and it is mainly fund flows and currency factors that have been driving the price advance." He also notes that metal stocks are continuing to push higher, "telling us that although demand may be improving, supply is still more than comfortable to accommodate any price increases."
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