World Copper Prices Dip Below Monthly Average

05 Oct 2010 • by Natalie Aster

World copper cathode prices in London Metal Exchange (LME) trading have slipped slightly this week as investment money can't determine whether a recovery in demand is due in coming weeks. Benchmark LME spot copper has traded at $2.79/lb this week, down from an average $2.85 for the previous days of September. LME copper averaged $2.80 in August. However, copper futures prices have jumped this week to $2.92 for December delivery on signs that the economy in the U.S., the world's second-biggest user of the metal, has returned to growth.

LME spot copper has more than doubled in price this year, helped by record first-half imports into China. Still, prices are down 10% from this time last year because the world recession has cut demand for raw materials. Overall, prices have been on a rise in 2009 but the movement has been erratic.

The copper futures price strengthened today as stronger retail sales in the U.S, added to indications of an economic rebound. "Federal Reserve Chairman Ben Bernanke said the U.S. recession is probably over, and the commodities market seems to have responded," says analyst Mark Heyhoe at Hanson Westhouse in London, in a phone interview with Bloomberg. "A lot of people are interested in commodities this week, particularly copper."

Still, analysts are talking about another copper price slide ahead, caused by falling imports by China and the possibility of higher exports by the world's largest consumer of the industrial metal.

Retailers turned in a surprisingly strong month in August: Sales were up 2.7%. Even excluding the "Cash-for-Clunkers"-fueled results at auto dealers, sales rose 1.1%, the best monthly gain since February. However, "with the "Cash for Clunkers" program over, expect to see a major reversal in sales in September, says Well Fargo Securities economist Adam York

"In the next two months, I'm expecting to see some moderation in Chinese imports given that the restocking process is at a mature level," says Ben Westmore, commodities economist at National Australia Bank. "For prices," he tells Reuters, "the implication would be slight falls."

"There are investor inflows into the base metals and those flows are driven more with an eye on the expected broader base recovery in consumption next year," suggests David Wilson, head of commodities research at the Societe Generale investment bank in Paris.

"We think prices will drift for a bit," he tells Reuters, "but I think they will still be higher in the fourth quarter."

Meanwhile, Australia's Macquarie Bank this week has adjusted higher its 2009 forecast for copper to $2.38/lb and its 2010 outlook to $3.20 to reflect the surge in Chinese buying in 2009 and the prospect of a demand recovery elsewhere in 2010. These are high end forecasts of all those made public: For the year-to-date, LME spot copper is averaging $2.11/lb with the consensus forecast at $2.10.

Source: Purchasing


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