The Hindu Business Line : Positive fundamentals aid rise in copper price

AFTER being a star performer within the base metals complex - closing at a new all-time high of $3,446 a tonne last week - copper appears to be headed towards the heady target of $3,500 a tonne. On Wednesday, it was ruling at $3,470/3475 a tonne.

Positive fundamental developments in regard to both supply and demand underpin copper price gains, enhanced by short-covering.

Robust demand coupled with persistent supply shortage, steep backwardation, and the yuan revaluation combined to take the copper market to dizzy heights.

Copper stocks at LME continue to be low at 25,600 tonnes, although there was a slight increase from last weekend.

"Copper fundamentals continue to look very strong and prices can be expected to rise further still, with prices getting additional fillip by short-covering," said Ms Ingrid Sternby, Base Metals Analyst with Barclays Capital.

While demand levels, especially from China, are a source of strength, the LME announcement last week that it will be increasing initial margin for copper from $148 a tonne to $256 will make existent Chinese short positions on the LME vulnerable, she added.

The initial margin for a 25-tonne lot of copper would rise to $6,400 from $3,700 currently. Particularly large short positions held by funds are seen enhancing the upside risk.

The latest Chinese Customs data reported that in the first six months of 2005, refined copper imports rose by 3.8 percent year-on-year, amounting to 6,92,394 tonnes. Demand from South Korea is also reported to be robust.

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