Supply weighs on copper

By Reuters Time of article published Oct 16, 2013

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London - Copper prices fell for a second day on Wednesday with investors worried by growing supplies and the struggle by US politicians to find a last minute deal that would prevent a federal debt default.

The United States prepared for a last ditch effort to avoid a historic lapse in the government's borrowing authority, with Democrat and Republican senators said to be close to agreeing on a proposal to raise the debt limit.

But the measure's fate remained uncertain in the fractured Republican-controlled House of Representatives.

The world's largest economy will lose authority to borrow more money on Thursday if a deal is not reached.

“To use the word confident is wrong, but the market genuinely doesn't think the politicians would be reckless enough to trigger a full scale default,” said VTB Capital analyst Wiktor Bielski.

Benchmark three-month copper on the London Metal Exchange was untraded in official rings, but was bid at $7,180 from $7,240 at the close on Tuesday.

Copper prices are recovering from three-week lows of $7,081 a tonne reached last week, but remain down by more than 8 percent this year.

Weighing on prices are bets on growing supply, enhanced Wednesday after Freeport-McMoRan Copper & Gold Inc said it had reached a tentative agreement in pay talks for the 2013-2015 period with its Indonesian union workers.

“There is a perception that because mine supply growth has been strong the market (for refined copper) is in surplus. The problem is the evidence suggests the market is balanced or at worst, in deficit,” said Bielski.

“I still think there'll be a squeeze (higher) on prices, though it might be next year.”

In the wider markets, US stock index futures rose, and the dollar held its ground against a basket of currencies on cautious optimism that US politicians would strike a last minute deal.


Analysing investor responses to last week's annual metals industry week in London, Barclays noted a slight improvement in general sentiment but flagged that discretionary investors remain largely sidelined.

“Feedback from our meetings showed that investors are neutral-to-bearish on zinc and aluminium, neutral on copper, are becoming more constructive on nickel, and are bullish on lead and tin,” it said.

Tin has been supported by a drop in shipments from top exporter Indonesia after new laws forced all trade through its domestic exchange, with BNP Paribas predicting the disruption will help propel tin to at least $25,000 a tonne in 2014.

Elsewhere, markets are looking ahead to Chinese GDP and industrial production data on Friday.

Chinese Q3 GDP growth is seen at 7.8 pct compared with a year before, up from 7.5 percent in the second quarter.

In other metals traded, zinc was $1,898.50 in rings from $1,929 at the close on Tuesday, with latest LME data showing a massive 73,575 tonne increase in daily zinc stocks to 1.06 million tonnes, with most of the increase in the backlogged port of New Orleans.

Aluminium was $1,834 in rings from $1,849 and tin was $22,950 from $23,075.

Lead, untraded, was bid at $2,126 from $2,143, and nickel, also untraded, was bid at $13,910 from $14,000. - Reuters

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