Copper up as US opens, market weighs shutdown impact

October 05, 2013

Copper edges up
Copper edges up

Copper rose 1 percent on Friday, helped by bullish technical signals and as investors weighed whether the US government shutdown could delay a Federal Reserve move to cut its stimulus program. Stainless steel material nickel rose as much as 4 percent and soldering material tin rose as much as 5.5 percent to its highest in 6 1/2 months.

US investors have been influencing metal prices more than usual this week, with participants in top metals consumer China away from the market due to a national holiday and players in Europe cautious ahead of the London Metal Exchange week, an industry event which starts on Monday. The three-month benchmark copper contract closed up 1 percent to $7,260 a tonne on the London Metal Exchange (LME), in thin volumes due to China’s absence.

“As fundamentals are sending contrasting signals, financial rather than physical players are influencing the market at the moment, and technical signals suggested a rebound today since copper managed to stay above the 13-week moving average of $7,140 yesterday,” T-Commodity consultant Gianclaudio Torlizzi said. “The market is also starting to weigh the fact that the Fed could be more dovish than previously expected and it’s not for granted anymore that it will taper in December.”

Financial markets have been volatile since a US government shutdown began on October 1 caused by a political deadlock in Congress. A commodity-friendly stimulus program in the United States was expected to be tapered soon, since the world’s largest economy has given signs of recovery, but the shutdown could delay that. Congress also faces the challenge of raising the US government’s borrowing authority or risk default.

Benchmark tin closed at $24,000 from $22,750. The steep increase, in thin trading, was also supported by worries over the impact on supply of a ban on exports of unprocessed mineral ores from the world’s largest tin producer, Indonesia. Grasberg, the world’s second-biggest copper mine, could also be forced to shut down next year due to the ban. Indonesia has attempted to increase influence and profits and encourage local investment from metals companies, but the market remains unconvinced.

Three-month nickel closed at $14,050 a tonne from $13,525 on Thursday. Glencore’s closure of its Falcondo nickel mine could be a sign of nickel companies starting to buckle under rising production costs and falling prices, said Citi analyst David Wilson. “We’ve been waiting to see closures given that prices have been so bad,” he said. Nickel prices have dropped abouut than 18 percent this year. Benchmark aluminium finished up 1 percent to $1,845.50 a tonne, zinc ended up 0.3 percent at $1,873, while lead closed down 0.7 percent at $2,046. Courtesy: Reuters

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