Copper steadies

Copper steadied, with investors cautious but hopeful that Federal Reserve Chairman Ben Bernanke will show willingness to support the stalling US economy and on concerns a strike at a copper mine in Indonesia will sap already tight supplies.

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Copper steadied on Friday, with investors cautious but hopeful that Federal Reserve Chairman Ben Bernanke will show willingness to support the stalling US economy and on concerns a strike at a copper mine in Indonesia will sap already tight supplies.

A softer dollar against a basket of currencies also lent support.

Three-month copper on the London Metal Exchange was up 0.8 percent at $9,096 a tonne by 1111 GMT, after closing 1.7 percent higher in the last session, when it hit $9,075, the highest since Aug. 8. It dosed at $9,030 on Thursday.

All eyes are on Bernanke's speech at an annual central bank conference in Jackson Hole, Wyoming, the venue where he last year unveiled a second round of quantitative easing (QE), which ended in June.

Many investors do not believe he will show willingness to take other, relatively modest, steps to shore up the recovery.

“People are really hoping for a new round of quantitative easing but now they are scaling back their expectations,” said VTB Capital analyst Andrey Kryuchenkov.

“Bernanke could indicate that monetary easing is possible but more likely he will only talk about general instruments to support the economy.”

If Bernanke did announce a third round of quantitative easing, metals market would rise, at least temporarily, analysts said.

“Should we see a positive announcement out of Jackson Hole, we would speculate the sentiment boost along with a tightening supply situation are that the seeds being sown for a year end rally in the base metals space,” RBC said in a note.

A planned strike at Freeport McMoran's Grasberg copper mine in Indonesia reinforced worries over supply tightness, supporting copper prices.

A softer dollar was also underpinning metals prices. A weak US currency makes dollar-priced commodities more affordable for holders of other currencies.

COPPER DEMAND

Also supporting copper, deliverable inventories of the metal in warehouses monitored by the Shanghai Futures Exchange fell 8.7 percent, or almost 10,000 tonnes to 102,258 from last Friday.

“On the physical side demand is gradually recovering,” Kryuchenkov said.

“Stocks in Asia are moving down, spot premiums are holding up and the cash-to-three month is moving towards a backwardation. These are all signs that demand is there.”

The copper contango - a discount for cash over three-month material - narrowed to $14.50 from $25.75 on Aug. 3.

Three-month aluminium was $23,372 per tonne, up from $2,361 at the close on Thursday.

Japanese shipments of aluminium products fell 4.8 percent in July from a year earlier to 170,916 tonnes, industry data showed on Friday, falling year-on-year for the second month in a row as the impact from the March earthquake was still felt.

The country's output of rolled copper product also fell, dropping 4.1 percent in July from a year earlier, its second consecutive year-on-year fall, due to sluggish demand from auto and chip makers, an industry association said.

Tin was $23,700 from $23,400 while zinc was $2,242 from $2,228. Lead was $2,455 from $2,401 and nickel was $21,274 from $20,875. - Reuters

Source: http://www.iol.co.za/copper-steadies-1.1125995

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