This in spite of third quarter contract values in Scandinavia being higher than spot figures in mainland Europe. Flat products prices have been supported by a stronger than average economic recovery in the Nordic countries, especially Sweden, MEPS said.

“However, consumption across Europe is not anticipated to pick up quickly,” the report stated. “There is a widely held view that steel makers will need to cut production in order to balance supply with demand and support prices.”

Long products prices have generally fallen in northern Europe this month. Products, such as rebar, are most directly influenced by the cost of ferrous scrap, the consultancy said. Sales volumes have held up well in the run up to the summer stoppages.

MEPS said the stainless steel market is quiet due to the impending vacation and nervousness regarding nickel values. Sales activity was reasonable in June despite the anticipation of low alloy surcharges in July, the report said.

“Consumption by the automotive and engineering industries is good but most steel makers can see no orders beyond September/October, according to MEPS.

“Some Scandinavian suppliers sold reasonable tonnages in June, thanks to increasing demand from the shipbuilding and offshore sectors,” according to the consultancy. “Observers are cautiously optimistic about activity in the second half of 2010”

Bell Equipment , which posted a net loss of R372m for the financial year to March , said the increase in the copper price, and the resultant surge in mining, meant a major increase in the use of its materials- handling equipment. The company is operating in the Democratic Republic of Congo.

CEO Gary Bell said that the copper mining sector provided “growth and long-term stability” for the company. The downturn saw Bell’s revenue fall by more than half in the year to December, from R5,46bn in 2008 to R2,7bn last year. It posted a net loss of R372m, from a profit of R514m.

“As the copper price is the lead indicator of economic recovery, it is safe to say that those companies experiencing the benefits of the high price are also recovering,” said Econometrix Treasury Management MD George Glynos yesterday.

Copper production increased due to demand from China, which consumes 45% of the world’s copper.

South African companies working in the Copper Belt in the Congo and Zambia benefited from this consumption as these African countries were important copper suppliers . This was owing to the low reserves of copper in large producing countries such as Chile, Peru and the US.

While SA’s heavy equipment suppliers to mines would feel the positive effects of a high copper price, other South African companies, especially those focusing on electronics and electrical equipment, suffered. These included electrical engineering company Reunert . “When the copper price increased, the rand increased, which puts manufacturing firms at risk,” said CEO Gerrit Pretorius.

The global copper price hit a high of 7900 a ton in April, and although the price had softened this quarter, it was expected to remain high for the next few years, said a mining analyst.

However, the analyst warned that copper was a volatile commodity, with prices anticipated to come down again in 2013. The analyst speculated that the demand from Western Europe and the US would start to slow in the next few years owing to a decline in infrastructure development.

Meanwhile, apart from the buoyant copper price, the industrial metals sector is expected to stay on a recovery path this year. Demand for such metals was expected to be stimulated by lean producer inventories , government stimulus programmes and Chinese consumption, analysts said. Global economic growth is starting to pick up as a result.

BMO Capital Markets global commodity strategist Bart Melek said that global industrial production was recovering from a 12,5% decline last year to a 3,2% rise this year .

Consumer spending in the U.S. rose in May more than forecast, a sign households are gaining confidence in the recovery and the job market. Purchases rose 0.2 percent after little change the prior month, Commerce Department figures showed today. Incomes climbed 0.4 and the savings rate increased to the highest level in eight months. Copper has dropped 7.5 percent this year.

“The numbers suggests that the U.S. economic recovery remains on track, though the pace of the recovery is probably a bit slow for most people’s liking,” David Thurtell, a Citigroup Inc. analyst in London, said by telephone.

Copper for delivery in three months jumped $36, or 0.5 percent, to $6,806 a metric ton at 1:49 p.m. on the London Metal Exchange. Prices rose to a four-week high of $6,875 on June 25 and reached $6,873 earlier today.

LME copper rose as much as 2.7 percent on June 25, supported by U.S. consumer confidence rising in June to the highest level since January 2008. Prices gained 5.2 percent last week, the most since the week ending Feb. 19, partly on speculation imports by China might increase after the People’s Bank of China indicated on June 19 it would abandon the yuan’s two-year peg to the dollar.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, slid 0.5 percent last week, making dollar- priced metals cheaper in terms of other monies. The index gained as much as 0.3 percent today.

Sovereign-Debt Crisis

Copper has dropped this year as the dollar gained and investors speculated that monetary tightening in China and the European sovereign-debt crisis may curb demand.

Group of 20 leaders responded to the European debt crisis with deficit-reduction targets and agreed to pursue higher capital requirements for banks once economic recoveries take hold.

Stockpiles of copper tracked by the LME fell for a seventh day to 453,175 tons, the lowest level since Dec. 7. Bookings to remove metal from warehouses jumped for a third day to 31,900 tons, the highest since March 3. Copper stockpiles monitored by the Shanghai Futures Exchange declined 8.8 percent last week to 123,939 tons, the bourse said on June 25.

Aluminum for three-month delivery on the LME rose 1 percent to $2,016 a ton. Stockpiles in LME-monitored warehouses dropped for a third consecutive day, down to 4.44 million tons and the lowest since July 13, 2009.

Aluminum producers in Henan province, the largest maker of the metal in China, agreed to curtail 700,000 tons of capacity, Wen Xianjun, the deputy head of China Nonferrous Metals Industry Association, said today by phone from Beijing.

Nickel gained 2.4 percent to $20,226 a ton. Zinc fell 0.3 percent to $1,866.75 a ton, lead advanced 1.4 percent to $1,840 a ton and tin was unchanged at $18,125 a ton.

 FUNDAMENTALS

 * Three-month copper on the London Metal Exchange CMCU3
rose $4 to $6,450 by 0132 GMT on Friday, hovering above a
one-week low of $6,410 in the previous session.

 * Shanghai's benchmark third-month copper futures contract
SCFc3 slipped 0.6 percent to 51,340 yuan a tonne.

 * New U.S. claims for jobless aid rose last week while
consumer prices notched their largest decline in nearly 1-½
years in May, suggesting interest rates will remain ultra low
to nurse the fragile economic recovery. [ID:nN17254724]

 * Meanwhile factory activity growth plummeted in the U.S.
Mid-Atlantic region in June, a survey by the Philadelphia
Federal Reserve Bank showed, adding to worries about the
vulnerable recovery in the U.S. economy. [ID:nN17165505]

 * LME copper stocks rose 1,025 tonnes to 460,175 tonnes on
Thursday, the first rise since mid-May. [MCU-STOCKS]

 MARKET NEWS

 * The euro held steady near three-week highs on Friday, as
investors liquidated short positions after a robust response to
Spanish bond auctions, while the U.S. dollar appeared
vulnerable to a sell-off.[USD/]

 * U.S. stocks edged higher late in a choppy, thinly traded
session on Thursday as investors built on momentum gained after
the S&P 500 index broke through its 200-day moving average
earlier this week. [.N]

 DATA/EVENTS

 The following data/events is expected on Friday:

 * India M3 Money Supply June  (1130 GMT)

 * U.S. ECRI weekly index     (1430 GMT)

 PRICES
 Base metals prices at 0132 GMT
 Metal         Last       Change   Pct Move  End 2009 YTD pct
chg
 LME Cu        6450.00      4.00     +0.06    7375.00
-12.54
 SHFE Cu*     51340.00   -330.00     -0.64   59900.00
-14.29
 LME Alum      1958.00     -8.00     -0.41    2230.00
-12.20
 SHFE Alum*   14520.00    -60.00     -0.41   17160.00
-15.38
 COMEX Cu**     290.25     -9.15     -3.06     332.75
-12.77
 LME Zinc      1742.00    -23.00     -1.30    2560.00
-31.95
 SHFE Zinc    14125.00   -170.00     -1.19   21195.00
-33.36
 LME Nickel   19500.00   -300.00     -1.52   18525.00
5.26
 LME Lead      1742.00    -22.00     -1.25    2432.00
-28.37
 LME/Shanghai arb^           189
 Dollar/yuan          6.8282 \ 6.8289
 ** 1st contract month for COMEX copper
  * 3rd contact month for SHFE aluminium, copper and zinc
  ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
third month

“The Eurozone is a problem, it might have economic repercussions but for the moment there are still signs of recovery,” said BaseMetals.com analyst William Adams.

Investors were waiting for an EU summit on Thursday and Friday for any signs of aid for Athens, after efforts to arrange a special euro zone meeting failed.

Also of concern, Fitch Ratings cut Portugal’s sovereign credit rating by one notch to AA- on Wednesday, fuelling euro zone debt worries and boosting the dollar.

A stronger dollar makes dollar-priced metals costlier for non-U.S. investors.

Investors are awaiting weekly U.S jobless data due later this session for further clues over whether the economic recovery in the US is sustainable.

They were also cautious ahead of a hearing by a US market regulator to discuss possible limits on metal futures trading.

* Oil prices rebounded above $78 a barrel on Friday after sliding more than 2 percent the day before, lifted by a weaker dollar, but worries over the U.S. economy weighed on the market.

* US stocks recovered most of their losses but ended lower on Thursday after weak employment and durable goods data added to recent worries about the strength of the economic recovery.

* Asian stocks rose on Friday as investors tried to shake off weak economic data in the United States and Europe, but lingering caution about riskier assets supported the safe-haven yen.

FUNDAMENTALS

* Japanese shipments of aluminium products rose 23.1 percent in January from a year earlier, industry data showed on Friday, underpinned by a recovery in demand in the auto, electrical appliances and food sectors.

* Japan’s refined zinc exports for January fell 0.7 percent from a year earlier to 6 526 tonnes, with Taiwan accounting for the largest share, at 25 percent, Ministry of Finance data showed on Friday.

* Japan’s refined copper exports fell 19.6 percent in January from a year earlier to 47 936 tonnes, with China the destination for more than half the volume, Ministry of Finance data showed on Friday.

* Europe’s No.2 copper producer KGHM said 2009 net profit fell 14 percent to 2.5 billion zlotys ($843 million), in line with guidance upgraded last week as a rebound in copper prices capped KGHM’s profit decline.

* Deliverable copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 28 percent from two weeks earlier, while deliverable aluminium inventories rose 3 percent, the exchange said on Friday.

TECHNICALS

* Copper support was at $6 970 a tonne and resistance at $7 248. The 14-day RSI was at 52.5

* Aluminium support was at $2 070 a tonne and resistance at $2 106. The 14-day RSI was at 45.1

Trade was cautious, however, ahead of a slew of US data including fourth-quarter gross domestic product, consumer sentiment for February and existing home sales for January.

“We have been seeing good CTA buying in the last few days. Essentially metals are still an investment product, we still see a lot of money coming in. Sentiment is still ‘buy the dips’,” said a London-based trader.

Capping gains, Shanghai copper stocks soared 28 percent from before the week-long holiday to 149 478 tonnes, the highest since late September 2002, data showed.

Copper prices on the London Metal Exchange fell about 2 percent in the previous session on a strong dollar and disappointing US jobless claims and durable goods orders data.

PRICES

* Three-month copper on the London Metal Exchange was trading at $7 100 (R55 096) a tonne at 10:32 SA time compared with $6 999 at the close on Thursday.

* Aluminium was at $2 100 a tonne from $2 086.

DATA/EVENTS

12:00 SA time – Euro Zone final HICP, Jan

12:00 SA time – Italy PPI, Jan

12:00 SA time – Japan Forex intervention data for February

N/A – Germany preliminary HICP, Feb

15:30 SA time – US preliminary Q4 GDP Economists in a Reuters survey forecast a 5.7 percent annualized pace of growth, a repeat of the advance Q4 estimate.

15:30 SA time – ISM NY NAPM for February

16:45 SA time – US Chicago ISM for February, Economists in a Reuters survey forecast a reading of 60.0 compared with 61.5 in January.

16:55 SA time – Reuters/Univ of Mich final February consumer sentiment Economists in a Reuters survey expect a reading of 74.0 compared with 74.4 in the final January report.

17:00 SA time – US Existing home sales for January

MARKET NEWS

* The yen dipped on Friday but held on to the bulk of its gains from the day before, as doubts about the pace of a global economic recovery and persistent worries about sovereign debt problems in Greece kept investors away from riskier currencies.

* January shipments down 3.4 pct from December

* Output cuts by automakers pushed down yr-earlier shipments (Adds background)

TOKYO, Feb 22  - Japanese copper wire and cable shipments rose 2.5 percent from a year earlier in January to mark their first year-on-year rise since September 2008, industry data showed on Monday, as the economy shows signs of recovery.

Shipments of copper wire and cable totalled an estimated 54,000 tonnes in January, the data from the Japanese Electric Wire and Cable Makers’ Association showed. They were down 3.4 percent from 55,926 tonnes in December.

In January last year, demand for copper, used extensively in wiring and construction and often seen as a measure of economic activity, plunged as automakers slashed production to cope with the economic crisis.

Still, the latest figure was down 20 percent from January 2008 before the financial crisis hit, as Japan’s economic recovery remains fragile amid rising deflationary pressure and some industries, notably construction, have yet to recover significantly.

For a graphic on copper cable and wire shipments and a breakdown of the top three industries click:

Haywood metals analysts increased their 2010 forecasts from $1,000 per ounce to $1,120/oz for gold, and from $15.25/oz to $17.75/oz for silver. Long-term forecasts for gold were increased from $825/oz to $850/oz while silver was upped from $12.75/oz to $13.50/oz.

“New projects in our opinion require at least US$850 per ounce for gold to generate a reasonable return on investment, and with diminishing mine lives at existing operations, declining global production, and declining ore grades, we expect gold will be well supported at the US$850-per-ounce level,” they added.

In the meantime, Haywood has “adjusted our price deck to reflect the impressive rebound in base metals prices as well as improving fundamentals going forward,” the analysts noted. “We expect strength in all the base metals over the next 1 to 3 years as the economic recovery leads to increased demand-likely in excess of existing production capacity.”

Haywood also anticipates platinum prices to head higher through 2010 to $1,550 per ounce and to $1,800/oz in 2011. ‘Healthy supply and demand fundamentals are expected to support platinum investment demand this year, as long-term investors purchase the metal in anticipation of a revival of industrial demand later in 2010.”

Meanwhile, the analysts predict that palladium’s price is expected to rise sharply throughout this year. Haywood forecasts a $450/oz price for this year and $550/0z for 2011. “We have also increased our long-term palladium price forecast to US$450 per ounce, which now commences in 2017 (from US$200 per ounce commencing in 2013 previously).”

Haywood adjusted its rhodium price forecast from $1,650/oz to $3,200/oz this year and from $1,000/oz to $4,500/oz in 2011. The long-term rhodium price was increased from $1,200 oz. to $3,000 oz, which now commences in 2017.

BASE METALS FORECASTS

Among the base metals, Haywood analysts prefer copper “given the lack of new supply, long lead time to bring on additional capacity, and general producer discipline.”

“Zinc and lead would be our next preference, and nickel would be our least favourite metal at this point,” they advised.

Although China was the only source of increased copper demand last year, improving economic activity is expected to lead to growth in global copper demand through 2010. “In the short term, we expect copper prices to remain near current levels, and have forecast a 2010E copper price of US$3.05 per pound,” the analysts forecast.

Haywood maintains a bullish outlook over the longer term, and believes the U.S.-driven sentiment for a weakening copper market will be overshadowed by global development in China, India and other emerging economies over the next two to three years. The analysts suggested copper is likely to be in a small deficit this year and next, with the market moving back into surplus in 2012.

“We are forecasting a decline in copper prices after 2011, reaching as long-term estimate of US$2.25 per pound in +2014 as new mine production comes on line,” they predicted. “However, we continue to believe future mine production will depend largely on lower grade mines, which will redefine the industry’s coal regime.”

In their analysis, Haywood noted the zinc price increased 114% last year, ending the year at US$1.15/lb, “a price at which many marginal Chinese producers are profitable.”

“In the short term, we expect zinc prices to remain near current levels, and have forecast a 2010E zinc price of US$0.95 per pound, followed by uS$1.05 per pound zinc price in 2011, and US$1.10 per pound zinc price in 2012,” the analysts predicted. “We are forecasting that zinc prices will decline after 2012, reaching our long-term forecast of US$0.95 per pound in +2014.”

Meanwhile, Haywood noted the lead market should be roughly balanced this year, with a deficit in 2011 as lead demand continues to grow in China. “We are forecasting a 2010E lead price of US$0.95 per pound. We also expect the lead price to increase to US$1.10 per pound by 2012, then decline to our long-term forecast of US$0.95 per pound in +2014.”

The analysts also forecast that nickel prices will decline to US$7.75/lb in 2011, and reach Haywood’s long-term forecast of US$7.50/lb in +2012. “Our biggest concern with the nickel market is the number of new mines under construction…that will collectively add another +250,000 tonnes of nickel in a 1.3 million-tonne-per-year market, which has historically has grown 5% to 7% annually.”

Haywood suggests Chinese pig iron will continued to keep the market saturated. Meanwhile technology continues to lower the amount of nickel used in stainless steel. The analysts also note the Vale strike in Sudbury and Voisey’s Bay will also get settled, “which will further exacerbate current inventory levels globally.”

The analysts anticipate growing demand fundamentals will dominate the molybdenum market, “noting that the current list of greenfields projects lacks a significant number of large-scale ventures to potentially fill the expected supply deficit.”

“Year to date, molybdenum has averaged US$14.25 per pound, in line with our 2010E forecast price of US$15.00 per pound,” they added. “We expect that molybdenum prices will increase to US$20.00 per pound in 2011, declining to a long-term estimate of US$15.00 per pound in +2013.”

In the meantime, Haywood remains positive on its outlook for the uranium sector, “Particularly given the mid- to long-term supply/demand fundamentals driven by diversity in demand growth, but only stilted primary supply addition.”

The analysts expect a number of near-term catalysts “that will provide greater stimulus on the spot price through changes in government policy, renewed investment appetite, lower production at large mines, as well as tangible delays in commercial production from new projects.”

Marius Kloppers , chief executive, said many economies, notably the US, were still dependent on government stimulus.

He said such measures had helped drive recovery but had not addressed structural issues such as weak labour markets and excess production capacity in developed economies.

“A further variable will be the impact of any measures to control loan growth in China ,” he said.

He added that in the short term Beijing was focused on containment of asset inflation.

“We remain cautious about the speed and strength of the global economic recovery across the developed world.”

But longer-term prospects were “robust” on the back of growth in China and India, Mr Kloppers said.

BHP yesterday reported a rise in net profits from $2.62bn to $6.14bn in the six months to December 31, with profits excluding exceptional items down 7 per cent to $5.7bn, better than analysts’ forecasts.

BHP’s base metals, iron ore and metallurgical coal businesses performed better than expected, while the petroleum division disappointed because of lower oil and gas prices.

Benchmark copper for March delivery on the New York Mercantile Exchange’s Comex division plunged 11.60 cents, or 3.75 per cent, to finish at $2.9735 a pound, its lowest level on a settlement basis since Nov. 12.

Over at the London Metal Exchange, copper for three-month delivery closed down $230 at $6,590 a tonne, after dealing in a wide range between $6,948 and $6,545, another low dating back to the middle of November.

“It’s primarily dollar-related,” Michael Gross, futures analyst with Optionsellers.com in Tampa, Fla., said of the selloff.

“The sharp [dollar] upswing shows there are additional concerns about credit problems overseas in Europe.”

The dollar rose broadly after the European Commission backed a Greek deficit-cutting plan as expected and worries mounted over the fiscal health of Portugal.

A firm U.S. currency makes metals priced in dollars more expensive for holders of other currencies.

On the economic front, the pace of U.S. private sector job losses slowed in January, while modest growth was seen in the U.S. services sector.

This data followed more upbeat data that included Tuesday’s home sales numbers, Monday’s manufacturing figures and economic growth data on Friday.

“It’s [economic data] been a see-saw … fits and starts,” Mr. Gross said. “It’s going to be more of a daily thing, whereas copper is reacting now to more of the bigger macroeconomic factors.”

Copper was hit in late January by investors’ fears that signs of monetary tightening in China could choke demand from the world’s top consumer of industrial metals.

“China’s macro environment has changed from one predominantly focused on growth to one where balancing growth and inflation has become increasingly important to policy makers,” Barclays Capital said in a note.

“Given China’s importance to key commodity markets, these moves have had a noticeable impact on sentiment.”

LME copper stocks fell 675 tonnes to 540,475 tonnes. At the end of last week, copper inventories rose to about 543,500 tonnes to hit their highest level since last February.

Stocks of aluminum, (AL-FT) used in transport and packaging, dropped 6,600 tonnes, but held near a record high above 4.6 million tonnes.

A large portion of those aluminum stocks are tied up in finance deals, to release cash for producers and to earn banks higher returns than they would get in money markets.

Aluminum ended at $2,083 from $2,120. Analysts said improving U.S. auto sales was boosting sentiment.

“Over all, an annualized figure of 10.80 million units represents a solid figure especially given the state of the economy,” Standard Bank said in a note.

“It will take time for sales to recover back to pre-crisis levels, however the steady increase in sales is another positive sign that should continue to underpin … industrial metal prices.”

Zinc closed at $2,095 from $2,160, while battery material lead ended at $2,020 from $2,118 but earlier slipped 5 per cent at $2,010.25 to track other metals lower.

Tin closed at $16,600 from $16,450 and steel-making component nickel was last bid at $18,195 from $18,300.

(Updates prices)
By Michael Taylor and Rebekah Curtis
LONDON, Feb 1 (Reuters) – Copper rose on Monday, bouncing
from an 11-week low after strong manufacturing data from the
United States boosted the outlook for demand in the world’s
second-largest consumer of the metal.
Copper for three-month delivery MCU3 on the London Metal
Exchange closed at $6,791 a tonne from $6,745 on Friday.
Boosting the economic outlook, the U.S. manufacturing sector
grew in January at a faster rate than expected, with the index
reading at its highest since August 2004. [ID:nN01363414]
“Sentiment has improved,” said Eugen Weinberg, commodities
analyst at Commerzbank. “The U.S. ISM data means manufacturing
is picking up and implies the second largest client on the
metals market will be asking for more industrial metals.”
But Weinberg added that economic recovery will be slow — a
‘V’-shaped recovery with “a small ‘v’.”
The metal used in power and construction earlier fell to
$6,600, its lowest since Nov. 16, as strong economic data from
China stoked concerns that potential monetary tightening in the
world’s top metals consumer could dampen demand.
China’s economy made a strong start to the year, according
to two business surveys that also underlined the mounting
challenge policymakers face to curb inflation. [ID:nTOE61003S]
“China’s definitely going to tighten the amount of bank
lending across the economy, which will slow down growth,” said
Charles Kernot, an analyst at Evolution Securities.
“But they need to make sure that there is still some growth
coming through,” he added.
Highlighting strong Chinese growth, an index based on an
official survey of purchasing managers last month remained
firmly in expansionary territory, while an index derived from a
companion poll by HSBC scaled an all-time high.
“If interest rates start going up it’s better to have the
cash rather than the copper,” Kernot said. “People want to
liquidate as much as of their inventories as they can and use
the cash to pay off debt.”
Tin CMSN3 earlier fell 7 percent to the lowest since Dec.
24, 2009, chasing a broad sell-off in metals last week, and was
on track for its biggest one-day fall since early July 2009.
Other U.S. data showed construction spending fell more
steeply than expected in December. [ID:nN29161976]
STOCKS RISE
Copper fell 8.5 percent in January, as rising inventories at
LME inventories indicated demand outside China remained weak.
Stocks last rose 2,475 tonnes to 543,525 — their highest since
late February 2009.
The metal rose 140 percent in 2009 on robust Chinese demand.
Aluminium MAL3 closed at $2,085 versus $2,080 on Friday.
LME stocks of the metal used in transport and packaging fell 625
tonnes, but stayed near record levels above 4.6 million tonnes.
For an interview with the world’s largest aluminium producer
UC RUSAL, click on: [ID:nLDE61008Z]
Nickel MNI3 was at $18,000 from $18,500.
Anglo-Swiss miner Xstrata Plc (XTA.L) said it reached a
tentative deal with union workers at its nickel mining
operations in Sudbury, Canada, averting a strike.[ID:nN01179992]
Battery material lead MPB3 was last quoted at $2,045/2,047
from $2,020. Lead earlier touched a low of $1,960, a level not
seen since August.
Recent rises in cancelled warrants — material earmarked for
delivery — have given investors some signs demand may improve.
On Friday, cancelled warrants for lead rose to 15,850
tonnes, versus 11,700 on Jan. 28 and 75 tonnes on Dec. 17. LME
lead stocks rose 200 tonnes to hit 157,500 tonnes, the highest
since September 2003.
Zinc MZN3 was at $2,145 a tonne from $2,110 and tin MSN3
was at $16,150 from $17,200.
Zinc earlier hit a three-and-a-half month low at $2,074.
Analysts expect Chinese buying to remain subdued ahead of
its lunar new year holiday in mid-February. <CN/HOLIDAY>
For Barclays’ view on copper demand, see: [ID:nWEA8151]

Metal Prices at 1711 GMT
Metal Last Change Pct Move End 2009 Ytd Pct
move
COMEX Cu 307.35 2.75 +0.90 332.75 -7.63
LME Alum 2080.00 0.00 +0.00 2230.00 -6.73
LME Cu 6790.00 44.50 +0.66 7375.00 -7.93
LME Lead 2045.00 25.00 +1.24 2432.00 -15.91
LME Nickel 17950.00 -550.00 -2.97 18525.00 -3.10
LME Tin 16050.00 -1150.00 -6.69 16950.00 -5.31
LME Zinc 2145.00 35.00 +1.66 2560.00 -16.21
SHFE Alu 16190.00 150.00 +0.94 17160.00 -5.65
SHFE Cu* 54380.00 -1050.00 -1.89 59900.00 -9.22
SHFE Zin 17240.00 -155.00 -0.89 21195.00 -18.66
** 1st contract month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07.

Production was also higher from one year ago “due to an increase in ore processed and the full ramp-up of the Koala underground mine [at Ekati] which contains a larger proportion of higher value carats,” according to the company’s statement. Production continued to be influenced by variability of ore sources due to the mix of open pit and underground mining.

During the second fiscal quarter, specifically, BHP Billiton experienced strong price recovery across its entire commodity suite, which was driven by demand in China and restocking efforts underway from the developed world.

The mining giant concluded that government stimulus measures appeared to have supported a gradual return to normalized global trade, albeit from a low base one year ago, and that most key indicators across the developed economies showed improvement. The speed of economic recovery remains uncertain though, “particularly considering the eventual withdrawal of government stimulus. In China the impact of measures to control loan growth will add another future variable.” BHP Billiton expects some degree of volatility in the short term outlook for its commodities.

Shanghai copper has now risen for 10 consecutive days, matching record runs of rises in December 2005 and April 1994.

The third-month Shanghai aluminum futures contract rose by its daily 5 percent limit from the previous session’s settlement to 18,045 yuan a ton, as investors worried the harsh winter weather could disrupt supplies.

“The weather has had some impact on our production,” said an executive at an aluminum smelter in central China’s Henan province, which is a major aluminum producer, and was recently hit by the cold spell. “We get reduced power supply for some hours of the day. But so far the impact is not significant.”

The US released mixed economic data on Tuesday, showing sharper than expected home sales in November, but a surge in new factory orders offered assurance the economic recovery remained on track.

Recent manufacturing data from the US and China pointing to a steady economic recovery painted a rosy picture for industrial metals demand.

“The bullish sentiment in the market is extremely strong these days. We’ll see prices continuing to rise before a correction, possibly around the level $7,700 to $7,800 a ton,” said Wang Zhouyi, an analyst at Shanghai CIFCO Futures. “Some investors who closed their positions before the New Year’s Day holiday are now back buying again.”

Shanghai’s benchmark third-month copper futures contract hit a 17-month high of 61,850 yuan a ton, before ending at 61,650 yuan, up 2 percent, its biggest daily gain in two weeks. The most-active contract for April delivery rose 1.7 percent to 61,630 yuan a ton.

Three-month copper on the London Metal Exchange hit $7,606, highest since Aug 28, 2008, before easing to $7,590 a ton by 0700 GMT.

But some analysts warned the frenzy could fizzle soon.

“The upward momentum in copper is nearing an end, partly as prices are under the pressure from commodity index rebalancing. The growing LME stocks also weigh,” said Peng Qiang, an analyst at COFCO Futures.

For a commodity player, any rise in the commodity price has a multiplier effect on earnings, depending on its operating margin. The recent rally in zinc prices seems to have a similar effect on Hindustan Zinc and a further cascading impact on its stock prices. Zinc prices on the London Metal Exchange (LME) have increased by more than one-fourth within a span of three months.

This is definitely good news for the shareholders of Hindustan Zinc which is otherwise fundamentally quite sound. Thankfully, the rupee has not appreciated much against US dollar during the same time period, which will otherwise have brought down the realisation in rupee terms. The rupee appreciated only by 2.5% during this period. What this implies is that Hindustan Zinc must have realised higher prices on its products in the past two months.

The company reported an operating margin of close to 68% in the September 2909 quarter, an improvement of around 1,400 basis points sequentially. Zinc prices rose by a little more than 25% in that quarter. With the current rise of around 21% in commodity prices, the operating margin could rise somewhere between 73% and 76% in the December 2009 quarter, depending on other by-product realisations.

Considering the continuous signs of economic recovery in different parts of the developed world, there may not be any significant fall in zinc prices from here onwards. According to a report of international lead and zinc study group (ILZSG), the global demand for zinc in calendar year (CY) 2010 is expected to grow by 11.9% compared to the 5.6% decline expected in CY09.

The supply is also expected to be slightly below demand and this may exert some downward pressure on zinc prices. However, there are other factors such as the movement of dollar, the economic recovery in the developed world and demand from China which will be crucial in determining prices. Commodity experts are of the opinion that there may be little correction in short-term before zinc prices bounces back again.

Mr Market appears to be confused. The positive jobs number last week (which was actually pretty impressive) really threw a wrench into the Fed’s plans.

I find it interesting that the market sold off on the news. You would have thought the bubble boys would have taken the market higher after a -11k jobs print vs. the -150k or so that was expected.

Following the quick bounce after the announcement the market nervously closed pretty flat. Why?

There are a variety of reasons. As I explained in my last post, the banksters on Wall St really don’t want to see an economic recovery. The reason for this is higher interest rates would soon follow because inflation would begin to start rearing its ugly head.

This would then flatten out the yield curve which in turn results in a less profitable environment for the banking system. I mean think about it folks: Borrowing at 0% right now and then lending at 5% is a pretty sweet gig for the banks. Any moronic banker can make money in this environment.

An even sweeter gig for these criminals is being able borrow at zero while charging 30% annual interest on a credit card balance. When you see this type of thing, you really gotta wonder if any of these people have anything that resembles some type of conscience. I already have my answer.

I sometimes ask myself: Should this type of pillaging be regarded as criminal? IMO yes, but it’s legal nonetheless. It’s pretty sad when you can get a better deal lending money from the Sopranos instead of a bank!

I think it’s absolutely disgusting that these arrogant banking gangsters have the gonads to charge 30% on credit cards after we bailed their behinds out! Where are the torches and pitchforks?

I guess I shouldn’t be surprised after watching Wall St basically extort $700 billion from Congress in the form of TARP. Arghhh…I could go on and on about this but I feel my blood pressure rising so I better stop.

The bottom line here is this:

If the economy recovers, interest rates will eventually rise: Banking profits on lending would then shrink as a result. Housing prices would then drop because buyers will be forced to borrow at a higher interest rates.

Making matters worse, rising rates would lower the value of the bankers bloated mortgage bubble assets(MBS, etc.) that they continue to hold on their balance sheets. Banks would also have to pay higher interest rates on CD’s.

So you see, an economic recovery isn’t very profitable for the banksters. It could actually be very painful, especially if they borrowed at near zero and then bought 30 year bonds at 4+% and pocketed the spread. This is a great trade as long as interest rates stay low!

Many banks went under during the last economic crisis when they got caught on the wrong side of the interest rate trade like the one I described above as rates soared in the late ’70′s/early ’80′s.

A reminder to all:

Don’t ever be fooled by these snake oil salesmen when they cheer about an economic recovery. They will tell you over and over on CNBC that things are getting better in an attempt to pump up stocks. However, behind closed doors, a floundering economy with zero interest rates is what the banks really want because they can make a fortune. They will never admit this of course

Copper prices slipped below the $7000 mark on Tuesday, taking cues from the stronger dollar and a rise in inventories. Yesterday, copper inventories rose 750 tonnes and may continue to rise as fresh inflows in Korea are rising. China is re-exporting its ample oversupply of the metal in to LME listed Asian warehouses.

On the macroeconomic front, the Dollar Index strengthened on Tuesday as risk aversion in the financial markets led to demand for low-yielding currencies. The currency closed above the 76 mark as investors opted for safer investments. The Dow Jones closed lower by 107 points yesterday and this showed that investors remained wary about the economic recovery. Renewed fears over deteriorating credit ratings in US and UK benefited the Dollar Index as risk aversion loomed in.

Aluminum prices could trade with a positive bias on news that that the global aluminum surplus will narrow by 54% in 2010 from this year in China. The surplus of primary aluminum will narrow to 1.19 million tons from 2.57 million tons. Aluminum prices could trade with a positive bias today.

On the macroeconomic front, the Dollar Index could strengthen and trade with a positive bias as risk aversion could continue to raise demand for the low-yielding dollar. This could put base metal prices under pressure.

Copper
Copper prices are sideways with immediate support for MCX February contract seen at Rs.324.60. Further below, crucial support is seen at 322 levels.

Whereas resistance is seen at Rs.331.40 levels & further upwards at Rs. 335 levels.

Zinc
Zinc prices are sideways with immediate support seen at Rs.106.05 levels for MCX December contract whereas crucial support is seen at Rs.104.65 level. Short-term resistance is seen at Rs.108.90 whereas major resistance is seen at Rs 110.05 levels

At the MCX, copper for delivery in February contract moved down by 0.65 per cent at Rs 328.25 per kg in turnover of 2,958 lots. The metal for delivery in far-month April contract also shed 0.63 per cent to Rs 330.25 per kg in turnover of 142 lots.

Meanwhile, three-month delivery copper at the LME fell 0.07 per cent to USD 7,075 per tonne, while Shanghai”s copper went down 0.31 per cent to 55,510 yuan per tonne in the morning trade today. Market analysts attributed weakness in metal at the futures market to overnight losses at the LME as weak US services sector data raised concerns over global economic recovery and rise in inventories.

Meanwhile, copper inventories at LME rose by 2,400 tonnes to 445,400 tonnes.

The Indian rupee rose its highest close in more than two weeks on Thursday as the dollar’s weakness ahead of the European Central Bank’s (ECB) policy meeting triggered buying by exporters. [INR/]

China’s economy is expected to grow about 8.5 percent this year and the U.S. labour market improved in November, with private sector job losses declining for the eighth straight month and employers planning fewer layoffs. [ID:nSHA177594] [ID:nN02324306]

The outlook is still positive for the red metal on rising equities and hopes of an early economic recovery.

“Sentiment still remains positive for the entire base metals complex and there is no sign of correction, further moves would be data-dependent,” said Pranav Mer, an analyst with India Infoline in Mumbai.

Analysts said traders would closely watch the U.S. non farm payrolls data for further cues. See [ID:nN02324306]

“Buying could be initiated at 330 rupees, for a target of 337 and with a stop loss of 326 rupees,” said Priyank Upadhyay, head of research with Commtrendz Research.

In other base metals, zinc December MZIZ9 was 1.03 percent lower at 110.35 rupees per kg, while lead for December delivery MLDZ9 was 1.71 percent lower at 111.95 rupees.

The knock-on price effect will be felt in the reviving steel industry, just as its mills demand more feedstock to match the early signs of economic recovery.

Supply tightness has pushed scrap prices higher even when the demand was low because of production cutbacks. Prices in the Black Sea region, centred on major importer Turkey, are around $300 a tonne, having fallen as low as $130 late last year.

“Due to increasing steel output we will see more scrap demand coming in,” analyst Michael Shillaker at said.

“Supply side will improve as well, but it will be several million tonnes of more scrap coming in versus tens of millions of demand (due to production start ups). So will there be a shortage enough to drive the prices higher? Yes.”

The UK arm of Sims, the world’s biggest metals recycler, estimates a fall of 79 million tonnes in scrap consumption this year, from last year’s 475 million tonnes.

It does not see a significant bounce next year.

That 79 million tonnes dip came when steel production is down around 13.5 percent in January to October this year.

A harsh spell in the northern hemisphere winter, which would restrict the transport, and hence supply, of scrap, would add a further bullish factor.

“I think scrap will remain tight for the first quarter in 2010, simply because of weather,” Mitchell Padnos, executive vice president of marketing with Louis Padnos Iron & Metal Co in the United States.

“If business continues to slowly improve, then it will remain tight. Here in the Midwest, we have no snow on the ground yet, but when it does hit here, it will hit hard and that will slow down the raw material coming into the scrap yards, and that will keep supplies tight,” he said.

CHINA WILD CARD

Scrap is maybe the only material in the $500 billion steel industry where China is not a driver, as the world’s biggest consumer of the metal heavily relies on iron ore, with more than 90 percent of its mills operate through blast furnaces.

But this could change next year.

Supply and consumption of scrap, which is used in electric arc furnaces, has traditionally been driven by Western economies.

“Scrap corrolates closely with economic activity, so if there is a better economy, there should be more scrap supply,” said analyst Charles Bradford of Affiliated Research Group in New York.

“In general, the world economy is going to be better next year than this year, but not very much stronger and China is not a big scrap user.”

However, China is the wild card of the market.

Graham Davy, chief executive of the UK arm of Sims Metal Management said scrap purchases from China had risen about five fold to around 7.6 million tonnes in the first half of this year, compared with the same period last year.

The scale of any price rise will be hard to gauge but traders can bank on volatility continuing.

“It was a dismal first week in the scrap market in November, but by the second week, the whole thing turned around,” Padnos said. “The rumor has it that pricing is up anywhere from $40 to $80 over the lows of last month,” he said.

Obsolete scrap was about $230 a tonne in November, compared with a low of $100 a tonne last November. Shreded scrap, which is around $258 a tonne was at a high of $594 a tonne in July 2008, when steel market was booming.

 this week have raised upgraded the U.S. steel sector this week to “attractive” from “neutral,” saying higher raw material costs should continue to drive steel prices.

“This upturn is likely to be driven more by rising scrap, iron ore and coking coal cost increases, fuelled by China’s demand for these inputs, than by strong domestic demand for steel,” the analysts wrote in a note to clients.