BASE METALS

Copper jumps to 19-month high

A falling dollar and an increase in risk appetite has helped to boost prices of the metal

Author: Michael Taylor
Posted: Tuesday , 30 Mar 2010

LONDON (Reuters) - 

Copper hit a 19-month high on Tuesday, as a falling dollar and rising risk appetite boosted prices, with positive expectations for fund flows and metals demand going into the second quarter.

 Benchmark copper for three-month delivery CMCU3 on the London Metal Exchange traded at $7,821 a tonne from $7,770 at the close on Monday.

 Copper, used in power and construction, touched a high at $7,835 a tonne, as the euro hit a one-week high against the dollar on relief that debt-laden Greece was able to raise funds from the market. [USD/]

 "The whole Greece situation has settled down a bit (and) risk appetite has picked up on the back of that," said Dan Smith, an analyst at Standard Chartered. "There is a lot of volatility surrounding the end of quarter -- the next few weeks will be tough to call.

 "Everyone is anticipating new money coming from the funds but we don't know how much it is going to be."  A weak U.S. currency makes metals priced in dollars less

expensive for holders of other currencies.

 Copper is on course for a 15 percent rise this quarter, and analysts see prices maintaining the upward trend from April, as economic activity improves.

 Also aiding sentiment in recent sessions, copper stocks have fallen 40,175 tonnes since mid-February when they peaked at their highest level since October 2003. On Tuesday, they fell 625 tonnes to 514,900 tonnes.

 "Steadily falling LME inventories are an encouraging sign, implying that underlying consumption may be strong," investment bank Fairfax said in a note.

 

 JOBS DATA EXPECTED

 Vital for the future demand indicators will be Friday's non-farm payroll jobs data from the United States, the world's largest economy.

 "On Good Friday, the U.S. statistical office will still publish the job figures, and all the exchanges are closed -- thank you very much," said Herwig Schmidt, head of sales at Triland Metals. "There will be a chaos on Tuesday, I expect quite a turbulent Easter."

 Many financial markets will be closed on Friday and Monday for holidays.

 Aluminium CMAL3 traded at a near ten week high at $2,300 in LME rings versus $2,283. LME stocks for the metal, used in transport and packaging, rose 30,075 tonnes to remain near all-time highs above 4.6 million tonnes.

 Aluminium stocks hit a near nine-month low at 4.513 million tonnes on March 12. A large portion of those stocks are tied up in finance deals, to release cash for producers and to earn banks higher returns than they would get in money markets.

In other metals, steel making ingredient nickel CMNI3 was untraded in LME rings but last bid at $24,195 from $24,000 while battery material lead CMPB3 was bid at $2,166 from $2,151.

 Nickel earlier touched a high at $24,310 -- just off its highest level since June 2008.

 Speculators have been active in the nickel market in recent weeks, with latest LME data showing a dominant position controlling between 50-80 percent of cash warrants. [LME/WC]  The discount between the cash and three-month contract MNI0-3, at about $35 a tonne, versus $83 on March 1.  

 On Friday, Stratton Metals denied it was behind an unexpected rally in the nickel price this year. Stocks of nickel fell 258 tonnes to a near three month low at 156,090 tonnes, down from record highs at 166,476 tonnes touched on Feb. 5.

 LME data also showed two positions controlled between 40-50 percent of lead cash warrants. The discount between the cash and three-month contract MPBI0-3, was at $29.50 a tonne, compared to $38.30 in mid-December.

 Zinc CMZN3 traded at three-week highs at $2,360.50 a tonne in exchange rings from $2,332 and tin CMSN3 was at a multi-week highs at $18,350 in LME rings from $18,025.

(Editing by Keiron Henderson)