Business Daily from THE HINDU group of publications
Monday, Sep 04, 2006
Business Daily from THE HINDU group of publications Monday, Sep 04, 2006 |
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Agri-Biz & Commodities - Commodity Markets Relief unlikely from high copper prices for now G. Chandrashekhar
Happenings Growing view that copper market fundamentals are set to tighten. There is belief that Chinese buying of copper could emerge before too long. Perceptions are also strengthening in the lead market fundamentals.
Mumbai Sept 3 , The good news on the copper front is that the strike at Escondida copper mines is coming to an end with workers reportedly accepting management's latest offer of wage hike and bonus to end the 25-day long stroke. The not so good news, however, is that there seems to be no relief from high copper prices, at least for the time being.
Supply concerns
Despite news of end to strike, copper prices rallied to a high of $ 7,700 a tonne. Supply side issues continue to remain at the forefront of market concerns, with labour action, strikes and declining inventories all serving to highlight a constrained supply side. There is reason to remain bullish on copper price prospects. It is possible that markets are underestimating the combined impact on copper supply of the Escondida production losses and those at other mines. The strength in prices reflects a growing view that copper market fundamentals are set to tighten as the end of the summer holiday period approaches, with the potential for further labour action and production disruptions over the rest of the year to exacerbate market tightness, according to analysts.
Chinese buying
Also, there is belief that Chinese buying of copper could emerge before too long and this has buoyed the market. Stocks at the exchanges are also running low. Shanghai Futures Exchange posted a 1,400 tonnes drawdown in the weekending August 31 and now total 48,200 tonnes. On the other hand, CFTC data revealed that non-commercials have continued to increase their short exposure to Comex copper on the back of a combination of long liquidation and fresh short positions. The non-commercial net fund position in Comex copper has consistently been in the negative territory since early April 2006. Among other base metals, nickel is supported by positive demand from the stainless steel sector, the low level of LME stocks and the strike Voisey's bay nickel mine. Perceptions are also strengthening in the lead market fundamentals and there still looks to be upside price potential following the recent gains.
Gold: Despite the dollar firming up against the euro, the yellow metal has managed to hold on to price well above $ 620 an ounce. The dollar will of course continue to play a key role in determining the price action in the gold market. Unless there is a strong movement in the dollar, gold will continue to drift along in recent ranges in the next few weeks. Nevertheless, as data continue to point to physical demand weakness and with possibility of heavy selling by European central banks through the end of September, gold surely remains vulnerable to downward correction. However, buying support is likely to emerge at dips. The market could move between the low of $ 600/oz and the high of $ 640/oz.
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