Bank recapitalisation sparks copper price surge
Base metals prices have bounced due to an anticipated recovery of financial markets sparked by efforts to recapitalise banks.
Posted: Tuesday , 14 Oct 2008
SHANGHAI (Reuters) -
Base metals surged on Tuesday, with London copper futures up as much as 7.5 percent, steaming alongside rises in the region's equity markets as a global effort to recapitalise banks sparked a broad recovery.
Commodity markets have been seeking a bottom after falling almost 40 percent since July's highs. The Reuters-Jefferies CRB index, a global commodities benchmark, gained 3 percent to 298.70, after scoring its lowest since Jan 2007, last week.
The recovery came after the U.S. government agreed on Monday to take $25 billion stakes in several big banks to shore up the banking system and European governments pledged more than 1 trillion euros ($1.36 trillion) to bolster their own banks.
"Yesterday's worries have gone and we are all happy," ANZ senior commodities analyst Mark Pervan said, with a little irony.
"We should see more strength in the next day or two, but it's important not to get caught up in this whirlwind. Global markets are still in disarray and there are more risks on the downside. One swallow does not a summer make and this isn't done by a long shot."
Copper for delivery in three months on the London Metal Exchange rose 6.3 percent to $5,435 a tonne by 0330 GMT, extending a 6.6 percent rally in the previous session. The metal was trading at a 32-month low on Friday.
Earlier prices rallied as high as $5,500, a rise of 7.5 percent.
A surge in equities also helped metals as market euphoria spread, lifting the Nikkei share average 13 percent on Tuesday after a holiday on Monday, paring a little of last week's 24 percent loss and the commodities-heavy Australian S&P/ASX 200 rose 4 percent.
Copper also got a fillip after Chile's Escondida, the world's largest copper mine, on Friday declared force majeure on deliveries of some copper concentrates after it was forced to shut down a mill used to pulverize ore.
In Shanghai, metal futures surged to their upside limits in early trade following gains in their London counterparts.
The benchmark contract for Shanghai copper futures rose by its 6 percent limit compared with the settlement price on Monday to 44,190 yuan ($6,473) a tonne, before retreating to 43,580 yuan by Tuesday's midday bell.
Key contracts in Shanghai's aluminium and zinc futures also hit their upside limit.
"Shanghai metals were spurred by strong rebounds in related markets. The copper price then eased after arbitrage chances encouraged traders to sell in Shanghai," said analyst Yang Jun at China Futures.
"The darkness may have lifted a little but it will take a long time to rebuild market confidence and investors need to evaluate the current supply and demand structure," he said, adding that he expected LME copper to trade between $5,000 and $5,500 in the short term.
Metal Prices by 0330 GMT:
Metal Last Change Pct Move End 2007 Pct chg 08
LME Cu 5435.00 320.00 +6.26 6670.00 -18.52
SHFE Cu* 43580.00 1890.00 +4.53 56880.00 -23.38
LME Alum 2295.00 45.00 +2.00 2403.00 -4.49
SHFE Alum* 14410.00 205.00 +1.44 18180.00 -20.74
COMEX Cu** 232.80 0.00 +0.00 304.10 -23.45
LME Zinc 1485.00 5.00 +0.34 2370.00 -37.34
SHFE Zinc 11945.00 125.00 +1.06 18950.00 -36.97
LME Nickel 13000.00 200.00 +1.56 26350.00 -50.66
LME Lead 1620.00 55.00 +3.51 2550.00 -36.47
LME Tin 15000.00 475.00 +3.27 16400.00 -8.54
LME/Shanghai arb^ -173
Dollar/yuan 6.8261 \ 6.8264
** 1st contract month for COMEX copper
* 3rd contact month for SHFE aluminium, copper and zinc
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
(Additional reporting by Nick Trevethan in Singapore; Editing
by Clarence Fernandez)
(c) Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.