LONDON (Thomson Financial) - Copper was slightly higher as traders took advantage of lower prices after a selling rout sent the red metal's value to its lowest since March last year yesterday.
Weaker equity markets and rising inventory capped gains, however. Players reckon global economic turmoil, which is forecast to continue through 2008, will soften metals demand.
Further, because economic weakness stems from the US housing sector, copper in particular is vulnerable as the metal is mostly used in pipes and wires.
At 10.08 am, LME copper for three-month delivery was up at 6,525 usd against 6,515 usd, having earlier hit 6,430 usd, its lowest since mid-March last year.
"Given the price declines we continue to expect scale down buying to emerge into this weakness," said BaseMetals.Com analyst William Adams. He added, however, that "it will probably take a catalyst to get a rebound going. Until then any strength is likely to attract ongoing selling. This catalyst is likely to come from either a change in the trend in LME stocks or else a rebound in equities."
Copper LME stocks rose 2,800 tonnes and now stand at 185,500 tonnes. Analysts agree that swelling inventory is a sign of weak demand.
Since mid-September, when subprime woes heavily weighed on the metals market, copper stocks have risen steadily by around 40 pct.
"Copper will likely lead the complex even lower as long as US economic sentiment remains bruised," said Joel Crane, an analyst at Deutsche Bank analyst. "We remain convinced that this environment provides good buying opportunities across the complex as our economists have yet to forecast a full-bore recession, but instead see a more restrained slowdown in the US economy in 2008."
Earlier this week, however, the US Federal Reserve cut its economic growth forecast for 2008 to 1.80-2.50 pct from its June estimate of 2.50-2.75 pct.
In addition, the bank said inflation is now expected to slow to 1.8 pct from around 2.95 pct this year.
Such remarks from the bank sparked fears of slower growth, another interest rate cut and hammered the dollar to even lower levels.
While gold and oil would likely get a boost from another interest rate cut as the dollar would almost certainly decline further, metals tend to focus instead on the global economic picture and the fact that any weakness could hit demand.
As the dollar weakens most commodities rise as they become cheaper for those trading in other currencies.
Trading conditions today are thinned by a US Thanksgiving Holiday.
Elsewhere, zinc was up at 2,210 usd a tonne against 2,200 usd, having earlier hit its lowest price since late February last year of 2,284 usd a tonne. Lead was lower at 2,880 usd against 2,901 usd.
Nickel was down at 29,550 usd a tonne against 29,695 usd, aluminium edged down to 2,512 usd from 2,521 usd, while tin rose to 16,285 usd from 16,000 usd. [email protected] as/ejb/as/slj
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