Tuesday, 15 March 2011

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METALS-Copper cuts losses after Fed sees firmer recovery

  • Tuesday, 15 March 2011
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  •  * Copper losses slow as long-term demand prospects emerge


     * U.S. Federal Reserve maintains ultra-loose policy


     * Aluminium contango widens as inventories build


     * Coming up: U.S. housing starts on Wednesday
    (Recasts, updates prices, market activity; new byline, changes dateline,
    previously LONDON)




     By Chris Kelly


     NEW YORK, March 15 (Reuters) - Copper fell on Tuesday, but trimmed losses
    late after the U.S. Federal Reserve said the economic recovery is "on a firmer
    footing" and conditions in the labor market "appear to be improving
    gradually."


     The Fed kept interest rates unchanged and maintained its its program of
    extraordinary monetary support. [ID:nN15230117]


     Copper prices on the London Metal Exchange (LME) have fallen more than
    $1,000 a tonne from the record $10,190, hit last month.


     "I guess it stops the bleeding for copper for the time being," said Frank
    Lesh, broker and futures analyst with Future Path Trading in Chicago.


     "We're seeing equity markets perk up after the Fed on the upbeat assessment
    of the economy, but we're all watching these headlines right now."


     Despite the Fed's more upbeat economic assessment, markets would stay
    focused on Japan's nuclear power crisis and the impact it could have on the
    global economy. [ID:nL3E7EF3II]


     In after-hours business, LME three-month copper CMCU3 was trading at
    $9,136 per tonne by 3:17 p.m. EST (1917 GMT). It closed kerb trading down $77
    at $9,118.


     COMEX May copper HGK1 slipped 4.95 cents per lb to settle at $4.1370,
    then bounced to trade at $4.1775.


     Copper prices have held up better than most commodity markets as investors
    remained optimistic about longer-term demand trends.


     "The big bullish catalyst in the long-term is that there is going to be a
    lot of infrastructure to be rebuilt in Japan," said Sean McGillivray, vice
    president and head of asset allocation for Great Pacific Wealth Management in
    Oregon.


     "You're basically taking production which you can get in the form of
    economic growth and it's going back into infrastructure building."


     But copper remained vulnerable to uncertainty surrounding Japan's nuclear
    power crisis.


     "The latest news about radiation leaks in Japan is very worrying and
    markets hate worries. They hate geopolitical worries, earthquakes, tsunami and
    now this is yet another level of uncertainty," said Credit Agricole analyst
    Robin Bhar.


     "Further losses are likely in the next 24 hours because people are
    retreating from positions. It just all looks very grim at the moment."


     From here on out, Pacific Wealth's McGillivray said the trade will be
    keeping a close eye on the the Reuters-Jefferies CRB index .CRB, as it hugs
    its 50-day simple moving average.


     (Graphic: link.reuters.com/veq58r )


     "On the institutional side, the big index funds have been eye-balling the
    CRB price index .... flirting with the 50-day moving average.


     "If we get some stabilization in the more traditional assets, be it the
    equity indexes, I think you'll get people reloading back in and using this as a
    buying opportunity in those commodities that could potentially be used for
    infrastructure rebuilding," he said.


     ALUMINIUM CONTANGO


     Aluminium warehouse stocks rose to 4,624,925 tonnes, latest data showed, in
    sight of a record high of 4,640,750 tonnes hit on Jan. 20 2010.


     As stockpiles have grown, the market's price structure has moved further
    into contango MAL0-3 -- a discount for cash material over the three-month
    contract -- of around $34 a tonne versus levels of about $20 in early
    February.


     In late January, worries about market tightness narrowed the contango to
    around $7.


     But the rising inventories do not necessarily mean that demand for the
    metal is waning.


     "I think material is being moved on-exchange due to the ending of some
    warehousing funding deals," Daniel Major, an analyst at RBS, said, adding he
    expects demand for aluminium to increase in 2011 and thereafter.


     Aluminium CMAL3 was untraded at the close, but was last bid at $2,510
    from $2,555 at the close on Monday.
    Metal Prices at 1925 GMT
    COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
    Metal Last Change Pct Move End 2010 Ytd Pct


                                                             move
    COMEX Cu 418.50 -0.15 -0.04 444.70 -5.89
    LME Alum 2493.00 -62.00 -2.43 2470.00 0.93
    LME Cu 9118.00 -77.00 -0.84 9600.00 -5.02
    LME Lead 2509.00 -11.00 -0.44 2550.00 -1.61
    LME Nickel 24705.00 -1145.00 -4.43 24750.00 -0.18
    LME Tin 28550.00 -1350.00 -4.52 26900.00 6.13
    LME Zinc 2282.00 -48.00 -2.06 2454.00 -7.01
    SHFE Alu 16555.00 -250.00 -1.49 16840.00 -1.69
    SHFE Cu* 68600.00 -800.00 -1.15 71850.00 -4.52
    SHFE Zin 18205.00 -5.00 -0.03 19475.00 -6.52
    ** Benchmark month for COMEX copper
    * 3rd contract month for SHFE AL, CU and ZN
    SHFE ZN began trading on 26/3/07
    Metal Last Change Pct Move End 2010 Ytd Pct


                                                             move
    COMEX Cu 416.45 -2.20 -0.53 444.70 -6.35
    LME Alum 2493.00 -62.00 -2.43 2470.00 0.93
    LME Cu 9118.00 -77.00 -0.84 9600.00 -5.02
    LME Lead 2509.00 -11.00 -0.44 2550.00 -1.61
    LME Nickel 24705.00 -1145.00 -4.43 24750.00 -0.18
    LME Tin 28550.00 -1350.00 -4.52 26900.00 6.13
    LME Zinc 2282.00 -48.00 -2.06 2454.00 -7.01
    SHFE Alu 16555.00 -250.00 -1.49 16840.00 -1.69
    SHFE Cu* 68600.00 -800.00 -1.15 71850.00 -4.52
    SHFE Zin 18205.00 -5.00 -0.03 19475.00 -6.52
    ** Benchmark month for COMEX copper
    * 3rd contract month for SHFE AL, CU and ZN
    SHFE ZN began trading on 26/3/07


    (Source: http://www.reuters.com/article/2011/03/15/markets-metals-idUSLDE71O0F120110315)

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