economic optimism drives copper to 10 month hi

Economic optimism drives copper to 10 month high

Wed, Aug 5, 2009

Copper Articles, Feature Article

By Leia Michele Toovey- Exclusive to Copper Investing News

Optimism surrounding an economic recovery drove copper to a ten month high on Wednesday, as investors flooded the market with money, betting on stronger demand. Three-month copper on the London Metal Exchange hit $6,149 a tonne, the highest since last October, up slightly from Tuesday’s high of $6,105 a tonne. Industrial metals prices on Monday jumped after data showed strong manufacturing activity in China and the US. Copper was not the only metal that received a boost, aluminum climbed up to $2,034 a tonne, the highest since last November, while nickel leapt to $19,799, it’s highest since September 2008.

Sentiment was reinforced by positive housing market data from the United States on Tuesday. “People are hoping that (housing data) will start to improve demand in the U.S. and more interest in copper in particular,” said Charles Kernot, analyst at Evolution Securities. “It feels like the market will stay strong.” Also behind this week’s gains was news that U.S. auto sales jumped to their highest level in 2009 in July, as Americans rushed to take advantage of the government’s “cash for clunkers” program

Adding more positively to copper’s future, Bank of America Merrill Lynch upgraded the metal’s forecast. According to the investment firm, the red metal will average $3.18 a pound in 2010, 59 per cent more than previously estimated. “The de-stocking of the entire supply chain is close to an end, which could lead to a recovery in copper demand,” the bank said on Wednesday. “Concentrates market remains tight, a sign of constraints in mine supply.”

Good news for America’s economy quickly spread overseas, causing Indian copper futures to trade slightly higher. The most-traded copper August contract was 0.50 per cent higher at INR 292.25 per kg, after hitting a high of INR 293.5 earlier. The copper contract had gained 9.8 per cent for five continuous trading sessions, when positive global economic data and a weak dollar spurred buying in the industrial metal. “Copper may trade in the range of INR 287-297 for a couple of days,” said Navneet Damani, an analyst with Anand Rathi Commodities. Copper stocks in the warehouses monitored by the London Metal Exchange were down 800 tonnes to 285,100 tonnes.

Company News

Merrill Lynch’s improved forecast for the copper market also lead the investment firm to upgrade miners. Citing its more bullish outlook on the global economy thanks in part to the “swift implementation of monetary and fiscal stimulus packages”. The broker told clients that its positive view on copper in particular is based on very low inventory levels for this point in the economic cycle. It added that rising commodity prices could also be a catalyst for more mergers and acquisitions in the sector. It raised its rating on Xstrata, Vedanta Resources and Kazakhmys to `buy’ from `neutral’.

Atlas Consolidated Mining and Development Corp, the Philippines’ second-largest miner, plans to increase copper concentrate production at its Toledo mine as it ships more of the concentrate to China, the company said on Tuesday. Atlas said it planned to increase mining and milling production rate at its Toledo mine in central Cebu province to 35,000 tonnes per day (tpd) this month from 20,000 tonnes (tpd) at present. Forward planning and development activities are well under way to increase production to 42,000 tpd by mid-2010, and approximately 50,000 tpd by the second quarter of 2011,” Atlas said in a statement to Manila’s stock exchange. Operations at the Toledo mine, estimated to have deposits of 874 million tonnes of copper ore with an average grade of 0.41 per cent, resumed in July last year after a 14-year hiatus due to lack of funding to repair damage caused by typhoons.