Shanghai copper rises on strong spot prices
Shanghai copper rises on strong spot prices
Shanghai copper rose for a third straight day on Thursday, lifted by firm spot prices in the domestic market, while London metal also ticked higher as gains in crude oil helped reverse the previous session's modest loss.
Shanghai November copper the most-traded contract on the Shanghai Futures Exchange, rose 290 yuan, or 0.5 percent, to 59,140 yuan ($8,629) at midday.
"Copper prices in Shanghai were cheered up by the strong spot premium and are starting to show stronger momentum than the metal in London, after weeks of falling warehouse stocks," said Cai Luoyi, an analyst at China International Futures.
The spot premium in Shanghai touched its highest since January at around 1,000 yuan a tonne on Monday before retreating to around 600 to 700 yuan on Thursday, traders said.
Jane Jiang, an analyst at Shanghai Nonferrous Metals Industry Association, said: "Physical sales this week are good. We see limited availability in the market as many merchants are still sitting on their stocks."
Copper inventories monitored by the Shanghai Futures Exchange have dropped 42 percent in the past month as imports of the metal shrink.
London Metal Exchange three-month copper added $105, or 1.4 percent, to $7,615 on rising oil prices, after slipping $65 in the previous session.
"We expect the copper market to be roughly balanced or in slight surplus over the next year, with ongoing supply disruptions and reasonable demand keeping the market tight and stocks at very low levels," Macquarie Bank analyst Jim Lennon said in a note.
"We forecast a rally in the copper price to above $8,000 per tonne in the fourth quarter 2008, with the main driver being an anticipated pick-up in Chinese purchasing."
But other analysts were less positive. MF Global's Edward Meir said he expected LME copper to continue to test and eventually break, support at $7,100.
"We are $1,000 above the year's low, but the fundamentals now look worse so there is more to go on the downside," he said.
"We might get spikes higher, maybe to $8,000, but my feeling is that we will keep testing lower and eventually break $7,100 -- perhaps as soon as September."
The discount for third-month Shanghai copper futures versus the benchmark London contract, including China's 17 percent VAT, narrowed to 1,914 yuan, from 2,168 yuan a tonne on Wednesday. The discount shrank to 716 yuan on Aug. 13, its narrowest since March.
London Tin rose 0.5 percent to $20,600 after consultancy, ITRI, said the global tin supply deficit was forecast to reach up to 20,000 tonnes in 2008 due to falling supplies from Indonesia, revising up an earlier estimate of 12,000 tonnes.
It also estimated refined to output from Indonesia, the world's second-largest tin producer after China, at 71,500 tonnes in 2008, down from 78,000 tonnes last year.
Also supporting prices was news on Wednesday that Yunnan Tin , China's main tin producer, will slash production by about 3,000 tonnes in total in July-August due to repairs at plants in China. Metal Prices by 0258 GMT: Metal Last Change Pct Move End 2007 Pct chg 08 LME Cu 7615.00 105.00 +1.40 6670.00 14.17 SHFE Cu* 59140.00 290.00 +0.49 56880.00 3.97 LME Alum 2780.00 18.00 +0.65 2403.00 15.69 SHFE Alum* 18130.00 40.00 +0.22 18180.00 -0.28 COMEX Cu** 341.00 0.00 +0.00 304.10 12.13 LME Zinc 1720.00 -30.00 -1.71 2370.00 -27.43 SHFE Zinc 14055.00 90.00 +0.64 18950.00 -25.83 LME Nickel 19900.00 0.00 +0.00 26350.00 -24.48 LME Lead 1765.00 25.00 +1.44 2550.00 -30.78 LME/Shanghai arb^ 1914 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month ($1=6.848 yuan) (Editing by Nick Trevethan)