Last Updated : 29 December 2010 at 12:40 IST
LME copper hits new record, may climb further
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Industrial metals, copper in particular, are going to be strong. Copper would go further heights on improved demand outlook from China, the largest buyer of copper. Analysts expect supply constraints to add to the rally, Bloomberg reported.
Three-month copper on the London Metal Exchange gained 1 % to trade at $9,437.50 a metric ton, exceeding the previous high of $9,392 reached Dec. 21. The contract was seen trading at $9,397.25 on 12:18 p.m. Singapore time, high by 27 % this year.
Copper futures on the Comex in New York slid 0.9 percent to get locked at $4.289 a pound after touching a record $4.3350 Tuesday. March contract on the Shanghai Futures Exchange proceeded north for a second day, increasing 0.6 percent to trade at 69,440 yuan ($10,482) per ton.
Copper inventories under the scanner of Shanghai Futures Exchange dipped 7,410 tons to reach 120,426 tons previous week (the biggest decrease since the week ending Sept. 9) even as inventories in LME warehouses currently are down 26 % this year end, well on track for the first annual decline since 2004.
But this rally when exceeding the limits would trigger inflationary pressures and could be causal for demand destruction and a case of substitution, said experts.
Single company may hold 90% of copper stocks
According to the Monday data from London Metal Exchange, one unidentified company is having the potential to hoard 90% of the copper in warehouses valued (at Friday’s price) at $3.5 billion, the largest such position in two years.
Contrast this with reports that global copper market is deemed to experience 550,000-metric ton deficit next year, assuming 4 percent mine supply disruption, or 720,000 tons as well as global stocks tumbling to below three weeks of world consumption. Introduction of ETF products may further accelerate the depletion, according to Macquarie Bank Ltd.
The Warrant Tom Banding report had recorded more than 90% of copper holdings on November 7, 2008 indicating a dominant position in LME. The report is used by the LME to nudge the possessor to lend metal at fixed rates. The report previously was informing 80%-89% holdings.
The figure is inclusive of stockpile holdings and futures contracts that would expire in two trading days subsequent to Monday.
Copper has tripled in two years on Chinese demand, the largest buyer of base metal. Chinese copper consumption may decrease in the coming years by 8% to 11%, still, its burgeoning demands in the form of copper wires and appliance applications as well as expansion in power grids would keep the counting machines ticking.
The metal has climbed 27% this year on stock depletion, the first annual decline since 2004. Mining companies have failed to keep up with demand.
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