HOT ROLLED PLATE

US transaction figures have failed to hold at the May levels for hot rolled plate, despite little change in demand and a scarcity of imports,” MEPS said.  Sales to wind turbines, infrastructure and defense projects are firm but service centers report that few sectors for commodity plate are exhibiting any real strength. The Canadian market is described as satisfactory with particularly good performance in the wind tower and bridge building industries.
“Customers have conceded a small increase,” MEPS said. “However, demand from the construction sector is lacking, with distributors finding it difficult to make sales. A price slide over the summer cannot be ruled out.”

COLD ROLLED COIL

For cold rolled coil, tepid demand from distributors and some consumers, together with weakening scrap costs, has put negative pressure on cold rolled coil transaction values in the US,  MEPS said, despite some pick up in auto manufacturing.
“Service centers continue to keep stocks to a minimum.” The report said. “The Canadian mills have some holes in their June/July production schedules, leading to short delivery lead times. Thus, transaction numbers have fallen from the levels of a month ago, although, the steelmakers are indicating that they fully expect them to rebound in August. Buyers are starting to receive more import offers but they are not attractively priced.”

COATED COILS

Auto demand for coated steel is still very strong in the US, MEPS said. Car sales improved again in May as the sector rebounded from a poor 2009. A state incentive scheme to persuade customers to purchase new, energy saving domestic appliances appears to be having a positive impact.
“Nevertheless, both hot dipped galvanized and electro-zinc coated coil transaction figures have slipped in recent weeks,” the report said. “The Canadian auto sector continues to perform quite well, although demand is expected to ease as the summer approaches. The mills have conceded a discount on recent sales of hot dipped material. However, there is little import competition with offers in line with, or higher than, domestic ones.”

WIRE ROD
The escalating price trend in the US has reversed over the last few weeks. The number of import offers has grown, relieving the tightness in supply from domestic sources, MEPS said.  In Canada, current spot numbers are $C20 per tonne below the May level. Business conditions are lackluster.

MEDIUM SECTIONS AND BEAMS

For medium sections and beams, MEPS said it had noted some price cutting in recent weeks in the US, where producers have very poor order books and are also having to cope with increased import penetration.
“Consumption in the non-residential construction sector remains at a dismal level,” the report said. “Canadian mill order intake is steady at best. End-user activity is slow and unlikely to improve in the short term. Customers are keeping inventories to a minimum.”

REINFORCING BAR

In the US, service centers are loath to hold much stock, the MEPS report said. Sales are weak. As scrap prices drop away, rebar transaction figures have begun to decline. “The reductions anticipated by Canadian customers in May have already started to take hold,” MEPS said. “Demand is dull with no significant changes envisaged in the near-term.”

MERCHANT BAR

In the US, Nucor surprised customers by reducing merchant bar transaction values by considerably more than the small $US5 per ton decline in the scrap surcharge, MEPS said.  “Service centers are particularly angry about the stock losses they will incur,” MEPS said. “Activity remains muted. Canadian demand is feeble. Transaction numbers trended upwards in May but there has been no movement since then. Improvement is unlikely in the near future. Although some imports are available, prices are not attractive.”

Copper +1525MT,

Nickel +558MT,

Lead +2125MT,

Zinc -575MT,

Alum -5275MT,

Tin -135MT.

Copper -500MT,

Nickel +924MT,

Lead +2050MT,

Zinc -400MT,

Alum -4525MT,

Tin -125MT.

Copper -2450MT,

Nickel +912MT,

Lead +1050MT,

Zinc +275MT,

Alum -4000MT,

Tin -70MT.

Copper -700,

Nickel -1296,

Lead +100,

Zinc +1275,

Alum -3025,

Tin -285.

Copper +250,

Nickel -1068,

Lead +350,

Zinc -375,

Alum -7275,

Tin -235 .

Copper +5175,

Nickel -660,

Lead +50,

Zinc -75,

Alum -3800,

Tin -70

Copper +0,

Nickel -378,

Lead +675,

Zinc +39900,

Alum +22750,

Tin -25

Copper +775,

Nickel -228,

Lead +325,

Zinc +1650,

Alum +38800,

Tin -10.

Copper +1350,

Nickel -378,

Lead -25,

Zinc +0,

Aluminium -5775,

Tin -190.

“We’re going to see a catastrophe in the market,” Threlkeld said yesterday.

Prices might slump to less than $1 (R7.55) a pound, equivalent to $2 205 a ton, or a third of yesterday’s price, said Threlkeld, who first got the world’s attention in 1996 when he showed that hoarding by Sumitomo would lead to a collapse.

“Some 90 percent of buying has been from speculators,” he said.

“Whether they are exchange-traded fund speculators or China pig farmer speculators it doesn’t really matter, because that buying is going to come back to the market.”

Three-month copper futures on the London Metal Exchange, which surged 140 percent last year after governments spent billions of dollars to lift their economies out of recession, traded yesterday at $6 750 a ton.

China, the world’s largest user, imported a record 3.2 million tons of the refined metal last year, up 119 percent from the previous year.

There were about 3 million tons of unreported inventories in China, said Threlkeld, who has traded the market for more than 40 years.

“Three million tons seems a bit excessive, given that that’s more than half of China’s total consumption last year,” said Li Rong, the chief analyst at Great Wall Futures. China’s copper consumption was about 5 million tons in 2009, he said.

“The price of copper is not just a function of how much inventory there is in the market,” said Li Junchao, an analyst at Western Mining’s futures department. “While it’s true that prices last year rallied way beyond their fundamentals, we expect the market to normalise this year.

* Puts 2010 copper estimate at 500,000 tonnes

* Says to produce 18,500 tonnes of molybdenum this year

* Still no restart date for strike-hit Cananea

LIMA, Feb 2 – Southern Copper Corp, one of the world’s largest copper producers, said on Tuesday it sees average copper prices at $3.25 per pound in 2010, as it expects emerging and developed economies to boost demand of the metal.

Copper, which is used in construction, rose 140 percent in 2009 on strong Chinese buying and supply concerns, but fell 8.5 percent in January as rising inventories suggested demand outside China was weak.

U.S. copper futures <HGHO> settled up 0.2 percent on Tuesday at $3.0895 a lb in New York.

“We believe that inventories of copper will start to die off during the year, reversing the last month’s trend,” Southern Copper’s Chief Financial Officer Genaro Guerrero said on a conference call with investors.

He said he expected buying from emerging economies like China to support prices through this year, as well as rising consumption in developed countries like the United States.

Southern Copper <PCU.N> <SPC.LM> also gave guidance for its 2010 production on the call.

It put its copper production estimate for this year at 500,000 tonnes, slightly above the 485,376 tonnes it mined this year, and its molybdenum forecast at 18,500 tonnes, in line with last year’s output.

The company said it expected its zinc sales this year be around 110,000 tonnes and its silver sales to come in near 16 million ounces in 2010.

CANANEA RESTART

Southern Copper, a unit of Grupo Mexico <GMEXICOB.MX>, operates the giant Cananea mine in Mexico, which historically has produced some 20 percent of the company’s copper output and has been hit by a strike for the past two years.

The company made a fresh offer to unionized workers late last month, but the union said miners would not accept it.

When asked when Southern Copper might be able to restart operations at the mine, Guerrero said he had no estimate.

But investors were cautious ahead the Lunar New Year holiday, which starts on Feb. 14, and will keep Chinese markets shut for a week. Many of China’s factories also close and demand for the metal used in construction and power drops.

By 1026 GMT, copper for three-month delivery MCU3 on the London Metal Exchange traded at $6,845 a tonne from $6,791 at the close on Monday and compared with a session low at $6,727.

London copper hit a two-and-a-half month low at $6,600 on Monday, before turning around later in the session, after data showed U.S. manufacturing grew in January. [ID:nN01363414]

“Funds have been strong buyers this morning,” said David Thurtell, an analyst at Citigroup. “The ISM data appears to have restored some calm to the bulls who were unsettled by the sell-off of the past few weeks.”

Concerns about China tightening monetary policy remain after strong purchasing managers data on Monday, and as Australia surprised many by holding interest rates steady on Tuesday. [ID:nTOE61003S] [ID:nSGE61003K]

Copper fell 8.5 percent last month, in part due to increasing worries about rising LME inventories, which indicate that demand outside China, the world’s largest metals consumer, remains weak.

The latest data showed copper stocks fell 2,375 tonnes to 541,150 tonnes but remain close to a more than six-year high.

“Inventories are still very high — copper close to six-year highs — and this is dragging on sentiment,” said Eugen Weinberg, an analyst at Commerzbank.

“Going forward in two weeks, the Chinese go into the New Year and they will close all factories, so manufacturing will drop strongly,” he added. “People are afraid of this, so are not taking positions or buying stocks before the New Year.”

INVENTORIES

Aluminium MAL3 traded at $2,105 from $2,085. Inventories in the metal, used in transport and packaging, slipped 3,125 tonnes but are still at near record levels above 4.6 million tonnes.

A large portion of those 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. [ID:nGEE5BA277]

Steel making ingredient nickel MNI3 traded at $18,250 from $18,000, while zinc MZN3 traded at $2,162 a tonne from $2,145.

Anglo-Swiss miner Xstrata Plc (XTA.L) reached a tentative deal with unionised workers at its Canadian nickel mining operations in Sudbury, Ontario, on Monday, averting a strike that would have all but shut down base metals production in the Sudbury region. [ID:nN01179992]

The agreement was reached in the shadow of a strike by more than 3,000 workers at Brazilian miner Vale’s (VALE5.SA) Sudbury nickel and copper operations, and smaller strikes at Vale’s Voisey’s Bay mine in Eastern Canada and at its Port Colborne, Ontario, processing operations.

The Vale Sudbury strike is now in its seventh month, with no signs that bargaining will restart any time soon. Some analysts have speculated a deal at Xstrata could spur Vale and the United Steelworkers union to restart talks. [ID:nN01179992]

Battery material lead MPB3 was at $2,088 from $2,045, while tin MSN3 was at $16,400 from $16,150.

Investors are keeping a close eye on movements in cancelled warrants — material already earmarked for delivery from LME warehouses.

On Monday, lead cancelled warrants were at 15,650 tonnes compared with 75 tonnes on Dec. 17.

“The auto sector should be very positive for lead, plus the issue of constrained mine supply,” said David Wilson, an analyst at Societe Generale. “We do expect consumption to be very positive this year — particularly driven by the Chinese auto sector, and a rebound in U.S. auto production.”

For graphics on LME metal inventories, click on:

here

here

here

here

here

Metal Prices at 1031 GMT Metal Last Change Pct Move End 2009 Ytd Pct

move COMEX Cu 308.75 0.90 +0.29 332.75 -7.21 LME Alum 2105.00 20.00 +0.96 2230.00 -5.61 LME Cu 6857.00 66.00 +0.97 7375.00 -7.02 LME Lead 2086.00 66.00 +3.27 2432.00 -14.23 LME Nickel 18175.00 175.00 +0.97 18525.00 -1.89 LME Tin 16350.00 200.00 +1.24 16950.00 -3.54 LME Zinc 2161.00 16.00 +0.75 2560.00 -15.59 SHFE Alu 16215.00 25.00 +0.15 17160.00 -5.51 SHFE Cu* 54280.00 -100.00 -0.18 59900.00 -9.38 SHFE Zin 17155.00 -85.00 -0.49 21195.00 -19.06 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

For the full year, the company posted net income of $987,8-million, compared with $3,5-billion in 2008.

Potash Corp said that potash sales volumes fell to their lowest since the group became a public traded company in 1989.

Fourth-quarter sales of 1,1-million tons of the crop nutrient were 23% lower on a quarter-on-quarter basis, but reflected an improvement over the 65% decline experienced for the full year, to 3-million tons.

“The fertiliser industry, like many other businesses, felt the impact of the global economic downturn in 2009,” said CEO Bill Doyle.

“While our earnings were well below our company’s potential, we remain committed – as we have been for decades – to strategies that protect the long-term value of our assets.”

The company has forecast a potash gross margin in 2010 of between $1,4-billion and $1,8-billion and total shipments of 7-million to 8-million tons.

The group’s potash capacity this year is estimated at some 11,5-million tons, which means that continued production curtailments are expected.

Potash Corp is forecasting 2010 net income per share in the range of $4 to $5, including $0,70-$1,00 in the first quarter.

Globally, the group said it expects to see potash shipments of around 50-million tons in 2010, marking the transition between the historically low levels of 2009 and a return to higher demand in 2011.

However, while this would be a significant improvement from 2009 levels, it “will not address the multi-year process of refilling distributor inventories and soil nutrient levels”, Potash Corp said.

“We believe the need for more food – and the nutrients to produce it – is irrefutable,” Doyle added.

“Even though fertiliser demand can be deferred on a short-term basis, as we saw in 2009, the long-term requirement cannot be denied.

“We enter 2010 with a sense of optimism, as we look ahead to helping fertiliser dealers and farmers begin replenishing nutrients in the soil and supply chain.”

Shares in the company slid 5,6% on Thursday morning, to C$110,03 apiece by 11:59 in Toronto.

* Copper inventories rise to highest since April

(Recasts, adds comments/details, changes dateline from SHANGHAI)

By Michael Taylor

LONDON, Jan 4  – Copper rose almost 2 percent to a 16-month high on Monday, building on gains of about 140 percent last year, on strikes in top producer Chile and as more investors piled into the metal.

But analysts warned of volatile trading and price corrections in the coming weeks, as rising inventories prove that outside of China, fundamentals remain weak. By 1102 GMT, copper for three-month delivery on the London Metal Exchange traded at $7,504 a tonne from $7,375 at the close on Thursday. The metal, used in power and construction, earlier touched $7,509.75, its highest since Sept. 1, 2008.

“If you are trying to justify the moves over the last month, you will fail to find any real driver except exceptional demand in China,” said Commerzbank analyst Eugen Weinberg. “Everywhere else we are seeing increased in inventories.

“It is due to only one reason — demand from investors.” The latest LME data showed copper stocks rose 75 tonnes to total 502,400 — their highest level since April.

Aluminium inventories fell 4,475 tonnes but remain near record peaks above 4.6 million tonnes, while nickel stocks rose 414 tonnes to a new all-time high at 158,424 tonnes.

Commerzbank’s Weinberg added that the recent rise in the copper price due to supply concerns in Chile was overdone.

Union workers at Chile’s giant Chuquicamata copper complex, the world’s second biggest, began a strike over pay early on Monday, a union leader said.

Unprecedented Chinese buying, investor cash, a weaker dollar and improving economic data, helped the red metal to rally in every quarter last year.

The outlook for China’s economy, and thus for metals demand, remains robust after the manufacturing sector steamed ahead in December, with strong rises in new orders and output driving the official purchasing managers’ index (PMI) to a 20-month high.

The dollar dipped, coming off an earlier four-month high against the yen on Monday but remained broadly supported on growing optimism about the prospects for a U.S. recovery.

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

“It’s more that people are selling the dollar to move into riskier assets, including metals,” said David Wilson, director of metals research at Societe Generale. “Index re-weightings are also happening over the next week or so.”

“Every indication is that indices will reduce percentage exposures to metals because they out-performed so dramatically last year,” he added. “But we’re still expecting indexes to take up more metal because of bigger flows of money coming in.”

On the macro calendar, U.S. December employment data due later this week will be watched for evidence of economic recovery and renewed demand.

Other metals tracked copper, with aluminium at $2,273.75 versus $2,230. The metal, used in transport and packaging, earlier touched a near-three week high at $2,278.

Steel-making ingredient nickel traded at $19,060 from $18,525, while battery material lead was at $2,494 from $2,432.

Zinc traded at $2,622.50 a tonne from $2,560, down from a high at $2,632.75, it’s highest level since March 2008.

Tin edged up to $17,355 from $16,950. Used in electrical solder, tin hit a 15-month high at $17,500.

Codelco, as the miner is known, has said it has enough copper inventories to meet its January copper deliveries.

Defying the Dollar

The dollar remained strong against the yen and other key rivals, but copper took its cue more from the looming strike as well as the better than expected Chicago PMI. As such, the rebound in dollar had little impact on copper (as well as other industrial metals) on confidence about the bull-run into 2010, thanks mostly to speculative buying.

So far, the red metal has more than doubled this year, leading gains in the CRB Index of 19 raw materials, and climbed almost fourfold in the decade as consumption rose in emerging economies including Chindia.

However, despite the improving global economic backdrop, there is far from a consensus on how copper will fare throughout the next 12 months.

2009 – Beyond Reality

Despite its red hot streak in 2009, copper’s continuous rally in the face of swelling inventories, a sign of weak consumption, has perplexed many in the market. Stockpiles and production worldwide have steadily increased this year alongside with copper prices. (Fig. 2)

The latest data showed London Metals Exchange (LME) stocks rose 6,375 tons to above 500,000 tons, their highest level since April. Furthermore, the almost 600,000 tonnes in LME and Shanghai exchange warehouses are enough to cover the lost output from strike at Chuquicamata for more than a year.

Copper A LA Gold

China’s unprecedented $585 billion infrastructure-focused stimulus package and strategic stockpiling efforts have had a major impact on copper prices this year. This is evidenced by the 165% year-over-year surge of China’s imports of refined copper to 2.58 million tonnes in the first nine months of 2009.

On that note, the market has looked beyond warehouses. Some even say copper is behaving more like gold rather than strictly a base metal. (Fig. 3)

Of course, a number of other factors such as an anticipated global economic revival, new investment cash, index/fund buying, a weaker U.S. dollar, concern over labor disruptions, have also contributed to overshadow bearish indications of the copper inventory build-up.

Copper Currency Standard?

While India is trying to accumulate gold reserves, China is going one step forward by buying up industrial metals on a scale that appears beyond the usual commercial reasons. Some believe Beijing may have made a strategic decision to stockpile metal as an alternative to US Treasuries and dollar holdings as it safeguards China’s industrial revolution, while the West may one day face a supply crisis.

Speculation of an ultimate “Copper Standard” also swirled when in March, 2009, Zhou Xiaochuan, the governor of People’s Bank of China, reportedly called for a world currency modelled on the “Bancor”. The Bancor was to be anchored on 30 commodities – a broader base than the Gold Standard.

Copper “The Red Gold”?

Meanwhile, India’s $1.2 trillion economy expanded 7.9% in the 3rd quarter of 2009, the quickest pace in six quarters. The growth lagged behind only China among the world’s major economies with equally strong demand from auto and power sectors. Copper demand in India is expected to soar by 6% next year, in line with the GDP growth forecast of 7%. .

As China and India each is looking to compete and develop their economies together, India could step up their copper buying efforts as well. Then, currency standard or not, copper could become the ultimate red gold as a strategic asset as well as an inflation hedge.

Electric Avenue Will Take It Higher

China is expected to expand 8.5% this year, according to the median estimate of economists surveyed by Bloomberg. Urbanization plus the next industrial revolution led by hybrid cars need plenty of copper. China plans to boost its annual production of electric or hybrid cars to 500,000 in the next two years, up from 2,100 last year. Such a shift would require huge amounts of electrically conductive copper.

Technically Bullish

Copper prices are still off their all-time high of $8,940 on LME notched in July 2008, before the global economic downturn caused markets to tumble.

Most of the technical signals for copper (Fig. 1) are very bullish, albeit a bit over-bought on some indicators like RSI & Bollinger Bands. But since the market just put in a new high, it may continue to become more overbought before corrections may occur.

Right now, it looks like the $7,500 to $7,600 levels should be the next resistance with potential retracement towards $6,500 and $5,800 levels. But if Western recovery continues to disappoint, or remain mixed, as they currently are, then we could see prices revert back to between $5,000/t to $6,000/t in 2010.

Chinese Copper Control

China is the world’s largest copper consumer with about 38% market share, and its record levels of copper imports this year has made up for some of the slack demand in the U.S. and Europe. Copper, the hottest among the base metals, is controlled mostly by China as the single largest buyer in the world.

Now, some market participants say imports of refined copper into China may not reflect demand for at least the next six months, or longer, as China digests stocks built this year as a result of record imports.

In addition, China Daily reported on Nov. 12, 2009 that copper stockpiles held in duty-free warehouses in China may be re-exported after surging to as much as 350,000 tons from almost none at the start of the year. The country’s imports of refined copper may lower to 1.6 million tons in 2010. However, the 350,000 tons reportedly belong to mostly private speculators and account for a fraction of the total imports.

Clearly, there is some copper supply/demand imbalance in China as the country is not entirely immune to this synchronized global recession. However, with copper price doubling up in 2009 and as China generally prefers buying on the dip, this re-export could also be a strategic tactic of Beijing in an attempt to push down the prices of copper.

2010 – Reality Bites

The general “recovery trade”, predicated primarily on China and other emerging economies infrastructure and industrial growth, lifted copper to overshoot the underlying fundamentals and somewhat disconnected from reality in 2009.

The continued rising copper stocks suggest demand has yet to recover outside China. As we enter 2010 with China taking an expected copper break, the trend for copper prices will increasingly be determined by the shape of economic recovery in the OECD.

The U.S. is the dominant focus for signs of recovery. The EU 15, which accounts for about 20% of global copper consumption, is also important, but the lead will come from the US.

The past 12 month it’s been a variety of reasons that lifted all commodities higher. Copper will unlikely have a repeat performance of 2009. The strength in copper may remain at least in the first quarter of 2010, but after that the market will face a lot of uncertainties regarding the Dollar, interest rate, monetary policy, China’s copper imports/exports change, and the high inventories as well.

An Economic Precursor

Either as a currency or as a new precious metal, one thing for sure is that copper is a bellwether for the economy because it is mainly used in housing, power generation and other cyclical sectors; therefore, it tends to lead other commodities.

Copper price dynamics over the next year or two could serve as a precursor to see if Asia can shift its focus from an export-oriented model to one that’s more internal consumer-based, as well as a realistic gauge of the global economy.

 FUNDAMENTALS

 * Benchmark third-month Shanghai copper SCFc3 rose 950
yuan or 1.7 percent to 58,580 yuan a tonne by 0238 GMT and
earlier hit 58,890 yuan, its highest since early September
2008. The more-active fourth month, April, hit 59,180 yuan, up
2.3 percent. The market is on course for a rise of almost 150
percent in 2009.

 * Deliverable copper inventories in warehouses monitored by
the Shanghai Futures Exchange fell to 96,362 tonnes from
104,377 tonnes a week ago, while stocks on warrant declined
11,892 tonnes to 30,609 tonnes.

 * Shanghai copper stocks have risen almost sixfold this
year, their first increase since 2005.

 * London Metal Exchange inventories, at 484,800 tonnes,
have risen 42 percent so far this year, their fifth consecutive
annual increase, and will see their highest year-end levels
since finishing 2002 at more than 850,000 tonnes.

 * For graphics showing global metals stocks, double-click:
 here
 here
 here

 * The LME remained shut on Monday for Christmas holidays,
but will reopen on Tuesday. Copper rallied to $7,167 on
Christmas Eve, $3 shy of a 16-month peak.

 * The latest boost to sentiment came from threats to supply
from South America, where 274 union workers plan to down tools
early on Monday at the 232,000 tonne-per-year Altonorte copper
smelter in Chile. [ID:nN27159011]

 * Elsewhere in the copper-rich nation, nearly 3,000 union
workers at the Chuquicamata mine complex, which produces around
4 percent of the world's copper, will vote on whether to accept
a final wage offer from state-owned Codelco [CODEL.UL].
[ID:nN27132980]

 * The same terms in a preliminary offer were voted down
last week, but union officials thought the offer would be
approved, despite some dissention amongst the rank and file.

 * Shanghai zinc SZNc3 jumped 3 percent to hit its highest
since March 2008 and aluminium SAFc3 rose 1.4 percent to a
15-½   month peak.
 PRICES
 Base metals prices at 0236 GMT
 Metal         Last       Change   Pct Move  End 2008  Pct chg
09
 SHFE Cu*     58580.00    950.00     +1.65   23840.00
145.72
 SHFE Alum*   16735.00    235.00     +1.42   11540.00
45.02
 COMEX Cu**     327.10      0.00     +0.00     139.50
134.48
 SHFE Zinc    20475.00    595.00     +2.99   10120.00
102.32
 Dollar/yuan          6.8268 \ 6.8286
  * 3rd contact month for SHFE aluminium, copper and zinc

Factory output in the world’s biggest metal consumer climbed 19.2 percent from a year earlier, the statistics bureau said. That exceeded the 18.2 percent estimate in a Bloomberg News survey. Imports of copper and related products jumped 10 percent since October, the customs office said.

“The bottom line is we think underlying consumption is booming,” Max Layton, an analyst at Macquarie Bank Ltd. in London, said by phone.

Copper for March delivery rose 4 cents, or 1.3 percent, to $3.1425 a pound on the New York Mercantile Exchange’s Comex unit at 8:25 a.m. The contract retreated 2.9 percent this week. JPMorgan Chase & Co. raised its 2010 copper forecast to $3.22 a pound, from $2.70 previously.

Copper for three-month delivery gained 1.4 percent to $6,880 a metric ton on the London Metal Exchange.

Expectations of revived demand as economies emerge from recession, along with a weaker dollar and record first-half imports into China, helped copper to more than double this year.

Copper stockpiles in Shanghai dropped to the lowest in two months, fueling the first gain in Chinese prices in three days. Inventories monitored by the Shanghai Futures Exchange fell 8.6 percent to 95,676 tons this week, the exchange said. That’s the lowest level since the week of Oct. 5.

Lower Stockpiles

The drop in stockpiles was “bullish on a two-to-three- months view,” Layton said.

Stockpiles tracked by the LME gained for a 29th day, up 1 percent to 466,075 tons. Canceled warrants, or metal booked for removal from warehouses, slumped 33 percent to this year’s low of 700 tons yesterday. Earmarked metal now accounts for less than 0.3 percent of total LME inventories, down from the 2009 high of 21 percent in May.

Among other LME metals for three-month delivery, aluminum rose 2.4 percent to $2,255 a ton. The contract reached $2,259 earlier, the highest price since Oct. 15, 2008.

Canceled warrants in LME-monitored warehouses have jumped 47 percent this month and now account for 3.9 percent of total stockpiles, compared with 0.5 percent at the start of the year.

“We remain skeptical about aluminum prices in the medium term,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said in a report. Prices rose partly because 50 percent to 75 percent of LME-monitored stockpiles were judged to be tied up in financing deals, he said.

“The material should re-enter the market over the next few months,” Weinberg said. An increase in Chinese aluminum production in November and rising stockpiles in Shanghai, now at the highest level since 2003, may also hurt prices, he said.

Nickel rose 2.3 percent to $16,645 a ton, zinc gained 2.3 percent to $2,322 a ton and lead advanced 2.2 percent to $2,325 a ton. Tin fell 0.7 percent at $15,200 a ton.

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.

December copper was up 10 cents to $3.03 per pound in New York trade, while three-month copper added $234.50 to $6,664.50 per tonne on the London Metal Exchange.

Demand hopes were stimulated by the news from the US Commerce Department that the United States gross domestic product was up by 3.5 percent in the third quarter, a sign that the US economy has exited the recession.

Other factors helping to push copper higher was a decline of 325 tonnes in LME copper inventories on the session and the likelihood that a strike at a copper mine in Chile, now in its 17th day and with no immediate prospects for an end, has caused the mine to reduce production.

Other base metals prices also saw gains as aluminium added $43 to $1,955 per tonne, zinc was up $75 to $2,265 per tonne, lead was $134 higher to $2,365 per tonne, tin added $350 to $15,000 per tonne, and nickel gained $890 to $18,690 per tonne.

Among precious metals, December gold added $16.60 to $1,047 per troy ounce in New York trade, while December silver was up 42 cents to $16.66 per troy ounce, January platinum was $31.30 higher to $1,338,20 per troy ounce and, in mid-morning trade, December palladium added $7.55 to $324.95 per troy ounce.

December copper was 4 cents lower to $2.96 per pound in New York, while three-month contracts on the LME dropped $40 to $6,530 per tonne on the session.

Inventories were up by 5,775 tonnes during the day to 379,825 tonnes.

Aluminium stockpiles, on the other hand, were down by 2,300 tonnes in LME warehouses, sending that metals prices $4 higher to $1,925 per tonne as some analysts forecast that aluminium inventories are already past their peak and on the way down.

Zinc and lead each saw prices drop by $10, to $2,219 per tonne and $2,350 per tonne respectively, while nickel added $140 to $17,760 per tonne in London.

Meanwhile, among precious metals, December gold added $2 to $1,089.30 per troy ounce and December silver was up a cent to $17.41 per troy ounce, but January platinum dropped $6.40 to $1,362.90 per troy ounce