News

LME copper gains, Shanghai seen up; yuan eyed

Date Apr 09 2010 11:24:57 Source:Reuters
    SINGAPORE, April 9 (Reuters) - London copper futures rose on Friday, snapping two days of losses, underpinned by positive US retail sales data and talk that China may revalue its currency after a visit to Beijing by U.S. Treasury Secretary Timothy Geithner.
    The New York Times reported that Beijing was very close to announcing a "small but immediate" revaluation and would then let the currency fluctuate more widely. 
    The dispatch from Hong Kong, which quoted people with knowledge of the policy consensus emerging in Beijing, coincided with a brief visit to the Chinese capital by Geithner for hastily arranged talks with Vice Premier Wang Qishan.
[ID:nSGE6370B2]
    
    FUNDAMENTALS
    * Three-month copper on the London Metal Exchange <CMCU3> rose $17 early on Friday to $7,912, down from a 20-month peak of $8,010 struck on Tuesday, and on track for a small 0.2 percent weekly rise.
    * When Shanghai closed on Thursday, LME copper stood at $7,857, suggesting a firm start to the day.
    * Analysts said copper''s failure to extend its move above $8,000 did not mean an end to the bull run that has seen prices double in the past 12 months, but represented consolidation after a near 10-percent rally since late last month.
    * "There''s more to come from copper. $8,200 is my first target and there is a chance we can take out the old high at $8,940. There is a lot going for it. A deficit market perhaps for this year and certainly for the next, China raising the renminbi and the return of the U.S. consumer," a dealer in Singapore said.
    * The one potential fly in the feel-good ointment was euro zone debt, he added. "If it all goes pear shaped in Greece or Portugal, the dollar will rocket and commodities will lose out big time."
    
    
    MARKETS NEWS
    * The euro inched up early on Friday as investors trimmed record-high short positions, but the single currency is likely to stay on the defensive as worries about debt-laden Greece simmer in the background. [USD/]
    * The euro started to recover ground after European Central Bank chief Jean-Claude Trichet assured markets that a Greece default was unlikely, prompting some sovereign names to pick up the battered euro in the New York session. For more on Trichet''s remarks see [ID:nLDE6361AJ]. 
    * U.S. stocks gained on Thursday after surprisingly strong March retail sales increased optimism that the economic recovery is on track. [.N]
 
    DATA EVENTS
    * The following data is expected on Friday <ECON>     
    - UK March producer prices                 (0830 GMT) 
    - U.S. wholesale inventories for Feb       (1400 GMT) 
    - U.S. ECRI weekly                         (1430 GMT)

Copper price hangs on developed world''s recovery

Date Apr 09 2010 11:23:36 Source:Reuters

    * Banks, analysts still see $2-$2.20/lb as long-term price
   * Supply deficits to shift to balance in 2013-14
   * Downward price risks seen without demand recovery
   * Upward price risks seen with supply constraints
  
   By Reese Ewing
    SANTIAGO, April 8 (Reuters) - The price of copper is better than anyone had imagined at this time last year, but industry leaders and analysts at this

week''s CRU/CESCO conference said current price levels may not hold without a more robust recovery in developed economies.
   The futures price of three month copper <CMCU3> reached $8,000 a tonne this week, quickly closing in on the $8,940 all time peak of $8,940 in July 2008

and far from the darkest moment for the industry later that year in December when it fell to $2,817.
   Lisa Morrison, economic risk advisor at consultants CRU, said supply and demand on the global copper market is finely tuned and any alteration in

perception will bring volatility.
   "If the developed world fails to recover, it will have an effect on emerging market growth because it is the developed markets that buy products from

them," said Morrison.
   She stressed, however, that index funds were holding more copper than ever and long positions -- bets that prices will rise -- are dominating the copper

futures market while short positions are waning.
   Freeport-McMoRan <FCX.N> Chief Executive Richard Adkerson told Reuters he was not comfortable going "all out" on investments in capacity with demand from

two-thirds of the world''s economy still in the doldrums. [ID:nN07163212]
   "When you have a price supported solely by Chine, we are just not real comfortable going all out right now," he said.
   Analyst Max Layton at Macquarie said his firm just raised its long-term price forecast for copper from $2/lb to $2.20/lb ($4,840/tonne), still well below

the current roughly $3.55/lb.
   "It wouldn''t take much for copper prices to fall from $8000 a tonne to $6000 tonne," Layton said. "Whether it reaches $5, $7 or $8 a pound will depend on

how much people believe in the economic recovery, especially in the developed world."
   Antofagasta''s chief executive, Marcelo Awad, told Reuters banks are still unwilling to finance new projects with price models for copper above $2/lb.
   "If you present a project that depends on copper at $2.20, $2.40 or higher, banks simply will not come on board under those terms," the executive said.
   Independent metals analysts GFMS said in Wednesday''s copper report that short-term copper prices would be volatile until demand recovered sufficiently to

justify current price levels.[ID:nNLL7FE604]
  
   UPSIDE RISKS  
   Of course, there is a strong outspoken contingent at this year''s copper gathering in Chile saying it is more likely that copper prices rise beyond their

current historically high levels, especially if developed economies begin to recover more robustly.
   It is a consensus that as the world economy recovers, there will be a deficit in copper in the coming years. Rio Tinto''s head of copper, Andrew Harding,

said copper supply and demand in 2011 would shift into a deficit. [ID:nN07163212]
   Macquarie''s Layton projected a generally balanced supply-demand in 2010, moving into a 500,000 to 600,000 tonne deficit in 2011 and a 250,000 tonne

deficit in 2012 before moving back into equilibrium with big new projects due to bring on new supply.
   "I don''t see why $9 a pound copper isn''t possible given the desire of the U.S. government for the dollar to depreciate against the Chinese currency,"

Robert Friedland, founder and chairman of Ivanhoe Mines <INV.TO>, said. (Editing by Gary Hill)

As copper projects rev up, deficit still seen

Date Apr 09 2010 11:23:02 Source:Reuters
    * Miners confident new projects won''t create supply glut
   * Old mines, Chinese demand to keep copper prices high
   * After two-year freeze, mega-projects set for 2014 starts
   * For more on coverage of the CRU/CESCO see [ID:nCOPPER]
  
   By Jonathan Leff
   SANTIAGO, April 8 (Reuters) - It''s unanimous: Even with buoyant copper prices reviving major multibillion-dollar copper mine projects that are scheduled to start up in the middle of this decade, there''s little chance of a supply glut looming.
   After a two-year pause, copper miners are once again embarking on a wave of new projects like Mongolia''s Oyu Tolgoi, the Tampakan mine in Philippines and a pair of Peru developments that could deliver a sizable wallop of copper around the 2013 to 2015 period, given normal lead times.
   Executives'' confidence that this won''t create another price-weakening supply-side surge is built not only on a strong faith in the unyielding rise in Chinese demand, but two other factors: the increasingly costly struggle to sustain output at old mines, and the industry''s long, well-established track record at failing to deliver major projects on time.
   The industry''s widely shared consensus that the next few years will be strong was little surprise at the world''s biggest copper conference, CRU/CESCO; the equal conviction of strength even three or five years ahead is more unexpected, given the raft of projects now on the cards.
   But far from a glut, most analysts and executives looked ahead to years of shortage, or at best a delicate balance, underpinning their belief that prices that have nearly trebled from late-2008 lows could be a permanent market feature.
   "The world''s copper mines are like little old ladies lying in bed waiting to die. They require these very high copper prices to be kept on oxygen," says Robert Friedland, chief executive of Ivanhoe Mines <IVN.TO> <IVN.N>, whose Oyu Tolgoi is one of the flagship developments of this period, due to yield 450,000 tonnes a year from 2013.
   Others cited repeated delays to big projects at a time when new developments are going to be more geologically complex and located in riskier countries than before.
   "A bust like ones we''ve seen in the past doesn''t seem likely," said Bart Melek, global commodities strategist at BMO Capital Markets.
  
   MOVING FORWARD
   That major sources of new supply are in the pipeline is undeniable.
   Ivanhoe and its partners signed the final agreement to proceed with Oyu Tolgoi last week.
   Xstrata <XTA.L> <XTA.AX>, the world''s No. 4 producer, is among the most ambitious, with plans to expand production by 60 percent to nearly 1.5 million tonnes annually by 2014.
   Its Peru projects, Las Bambas and Antapaccaya, which should get the final green light this year or early next, should start up around the end-2013 or early 2014, delivering more than 500,000 tonnes a year of capacity in a concentrated dose.
   That''s excluding the huge Tampakan development in the Philippines, which could deliver 450,000 tonnes a year, and which Xstrata hopes to execute during the next presidential term that begins this summer -- and would end in 2014.
   "We see supply continuing to be constrained and that provides us a lot of confidence to invest," said Charlie Sartain, chief of Xstrata Copper.
   Analysts largely shared the upbeat view. Mike Jansen, head of metals research at JP Morgan, said deficits could actually grow deeper, not shallower, beyond the middle of the decade.
   And the perception of a shortage, at least in the near term, is also helping fuel current price gains as copper market investors look beyond the steady rise in LME inventories to fret about future supply, creating a disconnect between stocks and price, says Max Layton from Macquarie.
  
   DECLINE
   Meanwhile other parts of the industry are investing more just to stand still, and the less-visible decline in existing operations will undercut any new supplies.
   BHP Billiton <BHP.AX> <BLT.L> is reviewing whether to push ahead with the full $7.6 billion Phase V investment in Chile''s Escondida mine, which is now expecting to hold production steady after two years of steep declines that cut output by nearly 400,000 tonnes, equivalent to about 2 percent of world demand.
   That development would replace an existing concentrator, helping sustain but not necessarily increase production.
   In Indonesia, the workhorse Grasberg operation will face a disruptive transition from the current open-pit operation to a more costly underground mine around the middle of this decade, resulting in at least a brief disruption in supply as it shuts down the pit before commencing underground mining.
   "We have what we call our valley (in terms of production) and we''re looking at ways of expanding these other underground operations or stockpiling to limit it," Richard Adkerson, Chief Executive of operator Freeport McMoRan <FCX.N> told Reuters.
   While the pessimism over future supply is a compelling argument in its own right, set next to the demand-side story it becomes overwhelming.
   "Clearly as the price lines up there will be more people pushing more projects, but...if all the predictions about China and India are even remotely correct, I cannot see how it is going to be easily met by supply," said Andrew Harding, chief of Rio Tinto''s copper business. (Reporting by Santiago team; Editing by Lisa Shumaker) 

Copper steadies at lower levels in late trade

Date Apr 09 2010 11:22:37 Source:Reuters
    * Copper dips towards $7,800, after $8,000 level this week
    * Speed of rally worries; investors bet on medium-term
   
    (Changes headline, updates with New York closing copper price, adds New York dateline/byline and analyst comments)
    By Chris Kelly and Rebekah Curtis
    NEW YORK/LONDON, April 8 (Reuters) - Copper maintained a slightly negative tone in late business on Thursday, as renewed anxiety over the fiscal stability of Greece weighed on broader market sentiment and technical barriers kept values pinned below recent 20-month peaks.
    Copper for May delivery <HGK0> on the New York Mercantile Exchange''s COMEX division ended down 1.10 cents at $3.5865 per lb, near the upper end of its $3.5350 to $3.59 session range.
    After the close, prices drifted down a bit further, but failed to break significantly lower -- a signal that the market wants to go higher, analysts said.
    "I think you have a strong bullish fundamental bias that is running into some short-term technical issues," said Michael Gross, futures analyst with Optionsellers.com in Tampa, Florida.
    "It appears that this market wants to go up. If a market doesn''t sell off on a day it should ... it''s usually an indicator that it''s going higher."
    Prices also took their cues from sharp swings in the currency markets, where the euro edged higher against the dollar <EUR=> in late trade after European Central Bank president Jean-Claude Trichet assured markets that Greece was in no danger of defaulting on its debt. [USD/]
    Still, lingering uncertainties about sovereign debt in the euro zone have curbed investor appetite for risk in recent weeks.
    Copper <CMCU3> for three-months delivery on the London Metal Exchange fell to $7,805 a tonne, its lowest since April 1 and closed at $7,895 a tonne in official rings versus $7,945 on Wednesday.
    The metal used in construction and power hit $8,010 a tonne earlier this week, its highest since August 2008 and around $1,000 away from an all-time high of $8,940 struck in July 2008.
    "A lot of people had $8,000 as a target for the market, and now we''re seeing some profit taking," said Daniel Smith, an analyst at Standard Chartered. "With a strong dollar and renewed worries about Greece, that''s adding to some weakness."
    Analysts questioned the sustainability of this week''s 20-month high in copper, as they are still concerned about the pace of the global economic recovery.
    "We''re seeing restocking, but it''s a question about whether it''s a sustainable recovery," Smith said.
    March imports of unwrought and semi-finished copper products in China likely stayed flat or fell slightly from a month ago as margins for profit-driven spot inflows sank. [ID:nTOE63606L]
   
    BETS ON LONG-TERM COPPER
    At the CRU/CESCO conference in Chile, the chief executive of Freeport-McMoRan <FCX.N> seemed to bet on the long-term view too, saying he was not ready to go all out on expansions until demand had recovered in most of the world, but he remained "enormously enthusiastic" about copper''s long-term outlook. [ID:nCOPPER]
    "Copper''s got extremely positive fundamentals going forward and a lot of this price is built on expectations for tighter conditions in the medium term," analyst Carl Firman at Virtual Metals said.
    In other metals, nickel <CMNI3> also slipped to its lowest in over a week at $24,269 a tonne and closed at $24,720 a tonne from $24,725, but it was still the strongest performer of the year, having risen more than 30 percent since January.
    Nickel''s price prospects look undimmed, analysts said, due to supply tightness and a recovery in the stainless steel industry, which accounts for about two thirds of nickel demand.
    Nickel stocks at LME warehouses dropped by 342 tonnes to 155,670 tonnes, their lowest since late December and down 6.5 percent since a record high of 166,476 tonnes in early February.
    On Thursday, canceled warrants -- material earmarked for delivery -- rose to 6,366 tonnes, the highest so far this year, with 3,324 tonnes of cancellations having occurred this week.
    Zinc <CMZN3> was at $2,380 from $2,400 and aluminum was at $2,359 a tonne from $2,352. Battery material lead <CMPB3> was at $2,290 from $2,290. Tin <CMSN3> traded at $18,600 a tonne from $18,575.
 Metal Prices at 1906 GMT
 
 Metal            Last      Change  Pct Move   End 2009   Ytd Pct
                                                             move
 COMEX Cu       357.50       -1.70     -0.47     334.65      6.83
 LME Alum      2358.00        6.00     +0.26    2230.00      5.74
 LME Cu        7891.00      -54.00     -0.68    7375.00      7.00
 LME Lead      2285.00       -5.00     -0.22    2432.00     -6.04
 LME Nickel   24700.00      -25.00     -0.10   18525.00     33.33
 LME Tin      18525.00      -50.00     -0.27   16950.00      9.29
 LME Zinc      2375.00      -25.00     -1.04    2560.00     -7.23
 SHFE Alu     16630.00     -155.00     -0.92   17160.00     -3.09
 SHFE Cu*     61800.00     -950.00     -1.51   59900.00      3.17
 SHFE Zin     19025.00     -465.00     -2.39   21195.00    -10.24
** 1st contract month for COMEX copper * 3rd contract month for SHFE
AL, CU and ZN SHFE ZN began trading on 26/3/07

US aluminum extrusion makers seek duties on China

Date Apr 09 2010 11:21:08 Source:Reuters
    WASHINGTON, April 8 (Reuters) - U.S. manufacturers of an aluminum product used by the automobile and construction industries have asked President Barack Obama''s administration to slap duties on competing imports from China, industry and  government officials said on Thursday.
   The U.S. Commerce Department will decide by April 21 whether to accept a petition charging that Chinese "aluminum extrusion" producers receive government subsidies and sell their goods in the United States at below-market prices, a department official said.
   That would lead to two separate Commerce Department investigations over the next 12 to 14 months into whether to impose significant anti-dumping and countervailing duties on the Chinese goods.
   The industry petition contends one way China subsidizes its domestic producers is by undervaluing its currency and it asks for countervailing duties to offset that.
   The U.S. government does not currently impose duties to offset currency manipulation, but is mulling that possibility in another case involving coated paper imports from China.
   Aluminum extrusions are made by squeezing heated aluminum compound through a die with a profile of the desired shape, according to an industry website.
   Construction and automobile industries are two of the biggest consumers of extruded aluminum and uses include doors and window frames, structural framing systems, roofing and exterior cladding.
   While some of the shapes are complex and not easily mass produced, others are more simpler and "susceptible to a lot of price competition," said Rand Baldwin, president of the Aluminum Extruders Council in Wauconda, Illinois.
   Both Canada and Australia have moved to curb imports of aluminum extrusions from China.
   U.S. producers of glyphosate, a herbicide used to kills weeds, also have filed a petition asking for anti-dumping duties on imports from China, according to the U.S. International Trade Commission. (Reporting by Doug Palmer; editing by Mohammad Zargham)