SINGAPORE, Nov 20: London copper on Wednesday climbed off three-month lows touched the session before, with Federal Reserve Chairman Ben Bernanke reaffirming support for ultra-easy monetary policy that has underpinned demand for commodities.
Copper prices have been tracking expectations over when the Fed could curb its stimulus, with investors hoping it will hold off for now. But prices have trended lower in the last week as worries mount over growing supply and cooling demand from China towards year-end.
‘Today copper prices may be up because Bernanke is reassuring on tapering. But fundamentally we have been bearish on copper, and this is mostly because of the oversupply concern,’ said Helen Lau, an analyst at UOB Kay Hian Securities in Hong Kong.
Bernanke said on Tuesday the Fed would maintain ultra-easy U.S. Monetary policy for as long as needed and would only begin to taper bond-buying once it is assured that labour market improvements would continue.
UOB Kay Hian sees a copper averaging at $6,800 a tonne next year.
Three-month copper on the London Metal Exchange had climbed 0.45 percent to $7,001.50 a tonne by 0248 GMT from the previous session when it finished barely changed.
LME copper sank to its lowest since Aug. 7 on Tuesday at $6,910 a tonne, having last week finally broken out of a $7,000-7,420 range in place for the past three months.
The most-traded February copper contract on the Shanghai Futures Exchange jumped 1.13 percent to 50,330 yuan ($8,300) a tonne.
Swelling mine supply has fed China’s copper smelters as the market moves into a surplus towards the end of the year.
China’s production of copper surged by 23 percent in October to 637,958 tonnes and is up nearly 14 percent for the year, although smelter sources have said the stats bureau is double counting some production.
On the demand side, utilisation rates at China’s copper rod producers have been dropping since July as orders fall away, even during what is traditionally a peak season for demand, Lau said.
‘Global underlying demand is quite fragile, only supported by China which itself is seeing a subtle slow down,’ she said.
Premiums for copper have held steady at $190-205 the past week, even as LME prices have fallen according to China based price provider Shmet, reflecting limited bargain hunting demand for the metal. (http://www.Shmet.Com/)
However, more support may come from China’s economic reform, which was buoying the country’s sharemarkets on Wednesday.
China’s officials indicated on Tuesday how they plan to steer reforms on interest rates, the currency and stock markets, following a top-level party meeting that promised sweeping changes over the next decade.
Open interest for copper has declined in the past few days, alongside LME prices, suggesting short position holders are taking profits – rather than opening new short positions, indicating prices may find a more stable footing soon.
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