copper set for chinese new year rebound...

Source: www.miningnews.com

Copper set for Chinese New Year rebound: analysts

Tuesday, 9 January 2007
Paul Garvey

THE looming Chinese New Year could help reverse the recent downward run in the copper price, with analysts at London's Numis Securities expecting to see more buying of the red metal once the Chinese calendar ticks over.

Numis said following the Chinese New Year period, which starts on February 18, the industry would see new buying interest from consumers in both physical copper and copper concentrate.

The analysts also cited a number of "price elastic dynamics", which would prevent the copper price collapsing or continuing to fall at the current rate.

"Whilst the copper price remains well above our long-term forecast ($US1.50/pound), we believe there are price elastic supportive factors at this price; namely the need at some point for China to re-stock the supply chain and strategic stockpile; the less attractive economics of scrap supply at lower prices, and the less pronounced incentive for substitution away from copper at lower prices," the analysts said.

"A combination of these factors plus still low inventories, and the fact the first quarter is seasonally weak anyway suggests some cushioning to the price in our view though major breakouts to the upside seem unlikely."

The analysts said while the current state of the copper price was likely to affect investor sentiment across the resources sector as a whole, mining equity valuations should remain robust "so long as copper prices average at around current price levels".

The spot price of copper on the London Metal Exchange fell again overnight, this time by $US1 to $5592 per tonne, as warehoused stockpiles inched closer to the psychological 200,000t mark.

Copper stocks bottomed out at just under 90,000t last year, around the time copper hit a high of $8788/t.


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Cheers, Piee