Copper rebounds from four-month lows
London, May 17, 2012
Copper rebounded on Thursday following hefty losses in the previous session that dragged prices to four-month lows, but gains were fragile as worries about the deepening political crisis in Greece kept investors cautious.
The metal used in power and construction snapped four sessions of falls and was on course for its biggest daily rise in three weeks, but worries surrounding the euro zone debt crisis, a slowdown in top consumer China and the fragile state of the US economy prevented further gains.
Three-month copper on the London Metal Exchange (LME) rose 0.9 per cent to $7,721.25 a tone, from a close of $7,655 on Wednesday.
Copper, which had since the beginning of the year rallied more than 12 per cent by early February, has shed almost all of its 2012 gains, falling to a four-month low of $7,625 in the previous session.
Investors remained cautious about the risk that Greece could leave the euro zone as prolonged electoral uncertainty has put its economy into a state of deep freeze, meaning whoever finally emerges as the new leader will take over a country already falling behind on its promises to lenders.
"Greece is really dominating the outlook in markets right now. With the prospect that elections won't be coming until June 17 there is going to be a lot of uncertainty and we're not likely to get a strong upward movement in (metals) prices until that is resolved," said Ivan Szpakowski, analyst at Credit Suisse.
Worries about the worsening situation in Greece were heightened when the European Central Bank said it had stopped providing liquidity to some Greek banks that have not been successfully recapitalised.
Reflecting caution in financial markets, European shares were under pressure while the euro held near four-month lows against the dollar. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.
Spain was also in focus, as it sold 2.49 billion euros of shorter-dated government bonds in an auction on Thursday, with average yields rising significantly compared with previous sales of the paper.
Data from the LME showed overall inflows of 2,100 tonnes of copper into warehouses monitored by the exchange, with warehouses in Busan, South Korea drawing in 2,875 tonnes of the metal.
Traders said China's smelters and merchants are delivering around 110,000 tonnes of refined copper cathode to London Metal Exchange (LME) warehouses in South Korea, in a rare hefty outflow of inventories that could pressure copper prices.
The exports come just two weeks after the trading unit of Jiangxi Copper Company, the country's top producer, said a group of copper smelters as well as trading firms would export refined copper cathodes to LME to help ease tight global supplies and trim near-record stockpiles at home.
In other metals, aluminium rose to $2,038.25 from Wednesday's close of $2,035 a tonne while zinc climbed to $1,900 from $1,898.
Nickel was at $16,999 from $17,005, tin was at $19,674 from $19,675 and lead traded at $1,958 from $1,971. – Reuters