Copper maintains highest levels due to weak dollar and improved demand

Tuesday, Mar 30, 2010

Copper maintained its bullish momentum in late trade on Monday with prices in New York and London stretching to their highest levels since August 2008 as a weaker dollar and improved demand prospects from declining inventory levels powered the advance. Copper for May delivery HGK0 on the New York MercantileExchange's COMEX division surged 13.25 cents, or 3.9 percent, tosettle at $3.5355 per lb -- the highest closing level for athird-position contract since late August 2008.

On the London Metal Exchange (LME), benchmark copper forthree-months delivery CMCU3 closed at $7,770 a tonne from aclose of $7,514 on Friday. After-hours, prices of the metal usedin power and construction rose further to $7,800 per tonne,another high going back to August 2008.

"The inventory numbers are starting to catch people'sattention," said Justin Lennon, analyst with Mitsui BussanCommodities (USA) Inc.
 Copper stocks fell 1,400 tonnes to 515,525 tonnes, theirlowest level since early January, after falling throughout March.Stocks hit a 6-1/2 year high of 555,075 tonnes in mid-February.

A fifth straight month of increased U.S. consumer spendingprovided additional momentum to the rally, Mitsui's Lennon said.

"It feeds the comeback in consumption," he said.

Nick Moore, global head of commodity strategy at RBS GlobalBanking & Markets, said the rally was more of a "risk-on" day,with a relief rally in the euro fueling that trade.

The dollar slipped against a basket of major currencies, andfell versus the euro after euro zone leaders agreed on a financialsafety net for Greece late last week.

"There is a real potpourri of reasons today," he added. "Fromcurrencies through to end-quarter shenanigans, but theimplications are that there will be tears before bedtime asproducers look at this and make plans to reactivate capacity,"Moore said.

COMPLEX RISES

Nickel CMNI3 ended at $24,000 from $23,600 after hitting asession high of $24,498, its highest since June 2008, and havingrallied more than 27 percent so far this year.

Stocks of nickel rose 426 tonnes to 156,348 tonnes, theirhighest level since mid-2003.

Stratton Metals Ltd on Friday denied it was behind anunexpected rally in the price of nickel this year, after the WallStreet Journal said the privately held global commodity tradingcompany based in London was seen as a main catalyst for the rally.

"Nickel has substantially outperformed the complex over thepast month," Goldman Sachs said in a note.

"However, we maintain that the fundamental drivers for recentnickel tightness in particular are unlikely to be sustained beyondthe near term. Specifically, we believe that the current nickeltightness may worsen in the coming weeks," the note said.

"We are therefore looking for an opportunity to short nickel,but believe the timing is a little too soon."

Aluminum CMAL3 ended at $2,283 from $2,220 and zinc CMZN3was at $2,315 from $2,230.

Battery material lead CMPB3 closed at $2,151 from $2,125 andtin CMSN3 ended at $18,025 from $17,725. Tin earlier hit$18,200, its highest since mid-January.

Source: Reuters