Copper steady as US dollar rallies

19 December 2016

Benchmark copper on the London Metal Exchange ended the session 0.2 per cent up at $US5,732 a tonne. The metal used widely in power and construction has fallen more than five per cent since breaking above $US6,000 last month.

The US dollar surged to its highest in 14 years against a basket of currencies after the US Federal Reserve raised interest rates by 25 basis points on Wednesday and signalled that a further three increases are likely next year — one more than forecast at its September meeting.

“The dollar is stronger, there is some caution in the market, it’s undermined equities and other risk assets,” said SP Angel analyst John Meyer.

“I’m reasonably optimistic for copper in the longer term as there aren’t any new large projects in the pipeline and the production costs of bringing on more supply are above where prices are now.”

In the near-term, however, the market is waiting to see how much more copper will be delivered to LME-approved warehouses, where stocks of the metal have jumped nearly 40 per cent to 295,300 tonnes since December 8.

Most of that has been delivered to warehouses in South Korea, Taiwan and Malaysia. Traders say that much of that metal has come from China.

Firm Chinese demand is expected to support copper prices going into 2017, though further gains could be difficult.

“We would like to see more supply cutbacks, declining stock levels and an increase in production disruptions — unusually low this year — if prices are to build on current gains,” said INTL FCStone analyst Edward Meir.

Three-month aluminium was down 0.6 per cent at $US1,736 a tonne, zinc rose 0.2 per cent to $2,815, lead gained 1.5 per cent to $US2,350, tin added 0.6 per cent to $US21,225 and nickel slid 0.9 per cent to $US11,320.

Source – News AU