copper prices continue to climb

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Copper prices continue to climb
DANIEL MAGNOWSKI


Friday, January 11, 2008

LONDON — Copper ticked up in early London Metal Exchange business on Friday, with buyers encouraged by the prospect of heavy demand from China, analysts said.

The metal, often seen as a good indicator of real economic activity, was quoted at $7,240/7,250 (U.S.) per tonne at 11:09 (GMT), up $50 from Thursday's closing price.

Copper, which fell steeply in the final quarter of 2007, like many other assets a victim of the risk-aversion caused by the global credit crunch, has so far risen 8 per cent in 2008.

It may have further to run if commodity indexes continue to buy the metal as they allocate cash among assets for the year ahead.

“There's still some to go, but that generally happens nearer the close of trading,” analyst Daniel Hynes at Merrill Lynch said.

For copper, the investment case is based on Chinese demand offsetting any slackening of metals use in the Western world.

“Even assuming a further slowing of U.S. metals demand, the strength of consumption in other parts of the world means that supply will continue to struggle to keep up,” analysts at Barclays Capital said.

Chinese customs data showed the country imported 224,553 tonnes of copper, including semi-fabricated products, in December, versus 223,777 tonnes in November.

Imports in 2007 rose 34.8 per cent to 2.78 million tonnes.

Bringing more metal to the market is a costly exercise for mining firms, which is another reason why prices have remained high compared with historical averages.

“China is a key demand factor, but also significant is the steady increase in production costs,” Standard & Poor's said.

Copper has stalled since hitting a two-month high of $7,450 on Wednesday, but upside appetite could return after U.S. Federal Reserve Chairman Ben Bernanke said the central bank was ready to act aggressively to boost economic growth.

Interest rate futures are now pricing in a greater than 90 per cent chance of a 50 basis point interest rate cut when the Fed meets on Jan. 29-30.

That could depress the U.S. currency, making dollar-denominated commodities cheaper for holders of other currencies.

Aluminum was down $18 at $2,473/2,474 per tonne, and zinc was down $53 at $2,377/2,383 per tonne.

Lead was down $5 at $2,560/2,570 per tonne, while tin was up $20 at $16,320/16,400 per tonne. Nickel was down $550 at $28,150/28,250 per tonne.

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