Tuesday, 17 April 2012 18:07
LONDON: Copper steadied on Tuesday from three-month lows in the previous session after expectations-beating German economic data calmed jittery investors while a surprise drop in Rio Tinto's copper output brought the metal's tight supply pipeline back in focus.
Three-month copper on the London Metal Exchange traded at $8,010 in official rings, little changed from the $7,980 close on Monday.
Copper fell to its lowest since early January at $7,885.25 on Monday, losing more than 9 percent from early April highs. Copper is up about 5 percent this year.
"We saw a significant lurch lower yesterday but it met some pretty decent buying so it does look like there is quite a bit of money reluctant to see prices go down," analyst Dan Smith of Standard Chartered said.
"Positive German ZEW data is helping to keep metals up today. You can be a bit gloomy in the short term, but the worst you'll see is $7,500. I still think it's a bullish medium term story. Rio Tinto mine production was down a lot and that was a surprise."
Spanish borrowing costs jumped at a debt auction on Tuesday but the sale went smoothly and German data gave an upbeat reading of the euro zone's largest economy, providing some relief to investors worried about the debt crisis.
The euro rose to a fresh session high against the dollar while European stocks extended gains after the data.
But risk aversion may resurface later this week during a Spanish bond auction of longer term debt on Thursday.
In fundamental news, Rio Tinto reported worse-than-expected falls in iron ore, copper and coal production in the first quarter after it was hit by bad weather, knocking the global miner's shares on Tuesday.
Mined copper output fell 13 percent to 119,500 tonnes against analysts' forecasts of more than 140,000 tonnes. The global copper market is seen in a 180,000 tonne deficit this year, according to a median poll of 19 analysts by Reuters in April.
Chilean state copper giant Codelco expects the market to remain tight this year, is optimistic about prices, and could issue debt in the second half if conditions are favourable, Chief Executive Diego Hernandez said on Monday.
"Today, US industrial production...is due and on Thursday, the US Philadelphia Fed Index. For metals to exit the current erratic trading pattern, more consistent economic data would be needed... Accordingly, today's numbers will be watched very closely," Credit Suisse said in a note.
SHORT TERM SQUEEZE
Glencore International is holding a dominant long position in the London copper market, trade sources said on Monday, as tight supply took the premium paid by investors for cash metal over benchmark three-month futures to its highest in 3-1/2 years.
The squeeze on nearby copper supply for April continued on Tuesday, highlighted by skyrocketing nearby premiums.
Copper for tomorrow/next day delivery - the cost of rolling the position for a day from the third Wednesday prime prompt day - shot to its highest in more than two years to $40 from $19 earlier, reflecting a lack of available supply.
The premium for cash copper shot to $79 per tonne against the benchmark three-months contract, the highest since October 2008.
Across other metals, three-month tin was not traded but was bid at $21,300 in official rings likewise zinc, used in galvanizing which was bid at $1,995 from $1,998 on Monday's close. LME stocks reached a new cycle high above 900,000 tonnes, the latest LME data showed.
Lead traded at $2,082.50 from $2,078 and LME aluminium at $2,087 from $2,065. Nickel was at $17,805 in rings from $17,500.
Copyright Reuters, 2012