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METALS-Copper hits four-month peak after new Fed stimulus plan
September 13, 2012 / 1:41 PM / 5 years ago

METALS-Copper hits four-month peak after new Fed stimulus plan

* Chasing copper rally a risk based on economy-analyst
    * Chinese spot copper 180-250 yuan lower than prompt futures
    * Tin slides after more signs of supply resuming from Indonesia
    * Coming up: U.S. August industrial output data Friday


    By Chris Kelly and Eric Onstad
    NEW YORK/LONDON, Sept 13 (Reuters) - Copper rose to fresh four-month highs
in choppy trade late on Thursday after the U.S. Federal Reserve announced
another aggressive stimulus plan to buy mortgage-related debt and other assets
until the outlook for jobs improves.
     In a significant shift in monetary policy, the Fed said it would buy $40
billion of mortgage debt per month and will continue to purchase those and other
assets until the weak employment picture shows marked improvement.
 
    "If the outlook for the labor market does not improve substantially, the
committee will continue its purchase of agency mortgage-backed securities,
undertake additional asset purchases, and employ its other policy tools as
appropriate until such improvement is achieved in a context of price stability,"
the Fed said in a statement.
    Copper's initial reaction to the Fed's latest easing efforts was volatile,
swinging above and below unchanged levels before extending its gains to a new
four-month high.
    "The FOMC meeting did not disappoint. There was significant new
accommodation. It clearly shows that they are going to continue to write big
checks, so to speak," said Bill O'Neill, partner of LOGIC Advisors in Upper
Saddle River, New Jersey.
    "But the Fed is saying by this move and by this statement that the economy
is very weak, with a particular focus on the labor market.
    "You could make the argument that chasing copper up here is risky based on
the economic situation."
    COMEX copper for December delivery settled up 1.75 cents at $3.71 per
lb, but pushed higher in late electronic trade to a new four-month peak at
$3.7465.
    On the London Metal Exchange (LME), three-month copper ended down
$21 at $8,075 a tonne before rallying in after-hours business to $8,200.50, its
priciest since May 8.
    Since last Friday, copper has broken above the key $7,800 ceiling that had
contained previous rallies for months, and broke out above the $8,000 mark in a
burst of optimism over $157 billion in infrastructure spending planned in top
metals consumer China and fresh measures to tackle the euro zone debt crisis.
    "Copper still has the China factor, but we're still in a weak economic
cycle. I wouldn't be buying things as related to any sudden optimism for
industrial demand," LOGIC Advisors' O'Neill said.
    Earlier in the day, U.S. data reinforced the Fed's employment-focused easing
action. U.S. jobless claims rose to 382,000 last week, versus consensus
expectations for a rise to 370,000.   
    The combination of higher prices and a rebound in open interest on the LME
in recent sessions shows that investors have been establishing new long
positions, although some of them were taking profits, traders said.
    Open interest in copper rose by another 4,664 lots to 248,479,
bringing the gain since the start of the month to 13 percent after touching the
lowest levels since January 2007.
    With the Fed meeting now in its rear view mirror, the market's focus will
likely return to China, where spot demand has been lacklustre and where its
infrastructure programme would take time to filter through to metal purchases.
    In China's physical copper market, spot cargoes were trading about 180-250
yuan lower than the ShFE prompt September month contract, reflecting
sluggish demand from downstream industries. 
    
 
 
    TIN SLIDES
    In other metals, three month tin bucked a broader uptrend, sliding
1.21 percent to $20,350 a tonne after further signs of supply resuming from
Indonesia.
    Indonesia's tin smelters have all restarted operations after a temporary
shutdown halved output from the world's top tin exporter last month, the
Indonesia Tin Association said.    
    In zinc, the premium of three-month metal over cash widened to $31 a tonne on Wednesday evening, compared with $25.75 the previous session and
about $5 in mid-August. This was due to Chinese investors liquidating long
positions against arbitrage plays and funds rolling their positions forward,
Sucden Financial said in a note.
    Three-month zinc futures ended up by a percent to $2,036 a tonne.
    Aluminum closed up 2.04 percent at $2,102 a tonne and the Sept-Oct
spread remained tight at a backwardation of as much as $20,
equalling Wednesday's levels.
    Aluminum profile manufacturers in China's Guangdong have reported a rise in
orders this month, after seeing their order books decline over the past 3-4
months, which analysts and industry sources are pointing to as a sign of
recovering demand in China.    

 Metal Prices at 1748 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       373.80        4.55     +1.23     343.60      8.79
  LME Alum      2101.00       15.00     +0.72    2020.00      4.01
  LME Cu        8075.00      -21.00     -0.26    7600.00      6.25
  LME Lead      2157.00       32.00     +1.51    2035.00      6.00
  LME Nickel   16750.00      100.00     +0.60   18710.00    -10.48
  LME Tin      20350.00     -250.00     -1.21   19200.00      5.99
  LME Zinc      2035.50       17.50     +0.87    1845.00     10.33
  SHFE Alu     15660.00      -80.00     -0.51   15845.00     -1.17
  SHFE Cu*     58250.00      -90.00     -0.15   55360.00      5.22
  SHFE Zin     15275.00     -155.00     -1.00   14795.00      3.24
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07

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