Copper near records; year end seen erratic

LONDON (BestGrowthStock) – Copper rose near record highs on Friday, underpinned by expectations of restocking next year by top consumer China, however trade was erratic ahead of the Christmas break.

Benchmark copper on the London Metal Exchange traded at $9,343 at 5:47 a.m. EST, up from the $9,300 close on Thursday.

The metal used in power and construction has climbed 27 percent this year, and earlier on Friday flirted with recent record highs of $9,392, rising to $9,371 at one point. Prices are widely seen hitting five figures early in 2011.

“For copper, the combination driving factors are going to continue to be strong Chinese demand, such as restocking, but also production failing to keep up with that demand, so the market moving into significant deficit next year,” said Standard Bank analyst Leon Westgate

Standard Bank sees the roughly 20 million tonne copper market in a 385,000-tonne deficit for 2011, widening to a 562,000-tonne deficit the following year.

“Although I am bullish in 2011…I allow myself to become super-bullish for 2012 purely because that stock level isn’t there,” he added.

An accident at a key export port in Chile has raised the specter of disruptions to concentrate supply. Chile is the world’s top copper producer.

The port could be down for over a month, Anglo American Chile CEO Miguel Angel Duran said on Thursday, but added that the company was hopeful the export stoppage would not hit operations.

Two copper traders said copper prices would likely hit new records before the end of the year.

“Copper probably won’t hit records today but it’s certainly not far away – we have seen a very strong bounce from yesterday,” said one. Christmas holidays have drained volumes, with three-month copper flow around one sixth of usual levels.

U.S. markets are shut Friday, while the LME is operating at reduced hours. Floor trade will finish at 9 a.m. EST, while via LMESelect will wind up at 11 a.m. EST. The LME will reopen on Wednesday Dec 28.

INDEX ROLLS

Commodity index compilers recalculate the weightings for the individual commodities in their indexes once a year, to reflect changes in the wider commodity markets they follow, and focus is now shifting to the January rebalancing.

“Attention is now beginning to focus on the DJ-UBS rebalance, which will see zinc getting bought and nickel getting sold during the early days of January,” said RBC Capital in a research note.

“This, along with the usual month/quarter/year end valuation games that get played, will make for interesting moves next week.”

The Dow Jones-UBS Commodity Index (.DJUBS: ) and Standard & Poor’s S&P GSCI index (.SPGSCI: ), which are followed by some $160 billion combined, according to Mitsubishi figures, will rebalance to their new weights in their respective indices between January 7 and 13, 2011.

The latest stocks data showed that copper stocks in Shanghai fell, but in LME sheds rose for a ninth session, having since mid-month climbed some five percent as consumers shed inventory to cut costs over the break.

But at 370,725 tonnes, total stockpiles remain still down by one third from cycle highs of 555,075 tonnes seen in February.

Copper’s ascent to record highs looks set to fuel more substitution in some applications, but the metal’s unrivalled conductivity and a lack of alternative technologies will ultimately limit this trend.

Other metals reflected coppers’ subdued trend. Aluminum changed hands at $2,450 a tonne, up from Thursday’s $2,432 close, with eyes focusing on a new exchange-traded product.

Stainless steel material nickel at $23,904 had climbed from $23,600 finish, while battery sector lead at $2,450 was nearly unchanged from $2,449 and zinc, used in galvanizing at $2,314 was up from $2,298.

Tin, the other metal pegged at a top performer for 2011, amid tight supply from top exporter Indonesia stood at $26,650, down from $26,875, but still within $1,000 of record highs of $27,500.

Metal Prices at 5:49 a.m. EST Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T

Metal Last Change Pct Move End 2009 Ytd Pct

move

COMEX Cu 425.60 -1.60 -0.37 334.65 27.18

LME Alum 2430.00 -2.00 -0.08 2230.00 8.97

LME Cu 9285.00 -15.00 -0.16 7375.00 25.90

LME Lead 2430.00 -19.00 -0.78 2432.00 -0.08

LME Nickel 23800.00 200.00 +0.85 18525.00 28.48

LME Tin 26700.00 -175.00 -0.65 16950.00 57.52

LME Zinc 2300.00 2.00 +0.09 2560.00 -10.16

SHFE Alu 16740.00 -45.00 -0.27 17160.00 -2.45

SHFE Cu* 68950.00 290.00 +0.42 59900.00 15.11

SHFE Zin 18860.00 -45.00 -0.24 21195.00 -11.02 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Reporting by Melanie Burton; editing by Alison Birrane)

Copper near records; year end seen erratic