Michael Taylor

Wednesday, December 24, 2008

LONDON — Copper rebounded 1.7 per cent on Wednesday, after touching a four-year low in the previous session as a weak U.S. dollar helped boost industrial metals in thin trade.

The dollar slipped against the yen and a basket of currencies in thin trade as investors braced for U.S. data that may add to the grim outlook for the nation's economy.

U.S. spending and durable goods data from 1330 GMT is likely to show declines, and follows figures on Tuesday that showed the U.S. housing market took a sharp turn for the worse last month.

“It's a mixed bag,” said Leon Westgate, an analyst at Standard Bank. “Volumes are pretty low as you would expect ahead of the holiday period ... The metals are generally trading sideways.

“We are just seeing a bit of a bounce in copper but not too much,” he added.

By 1031 GMT, copper for three month delivery on the London Metal Exchange rose to $2,899 (U.S.) a tonne from $2,870 at the close on Tuesday and compared with a session high at $2,918.75.

Prices of the metal used in power and construction fell to 4-year low of $2,825 on Tuesday and have fallen almost 70 per cent since a record high of $8,940 in July.

Fears over demand due to the deteriorating global economic outlook have caused the decline in prices.

Adding to economic concerns, copper LME stocks rose 3,250 tonnes to 331,450 tonnes, its highest level since early 2004.

The copper price declines are starting to cut supply, and further announcements of mine closures and production cutbacks are expected over the coming month, a Macquarie Bank report said.

A total of 1.14 million tonnes of 2009 copper mine output have been lost compared with initially planned production over the past quarter, and 1.38 million tonnes of copper output have been lost compared with that targeted for 2010, the report said, citing BrookHunt data.

But trading was thin as investors prepared for the Christmas holidays, with the London market due to close at 1305 GMT and re-open on Dec. 29.

“Volumes are still really very low,” said David Thurtell, a strategist at Citigroup. “Things will get better – picking when, we will have to see.”

“There is lot of cash sitting waiting there to be invested (and) it's just a matter of when people will get the confidence.”

Aluminum rose 1.1 per cent to a high of $1,577 but was last at $1,568 from $1,560. The metal used in transport and packaging has fallen heavily from an all-time high of $3,380 hit in July as downbeat news from auto makers dragged prices lower.

LME aluminum stocks jumped 17,400 tonnes to 2.25 million tonnes – a reminder of weaker demand for the metal – and a 14-year high.

Citigroup's Mr. Thurtell said recent cutbacks from Chinese producers was helping support aluminum prices.

Nickel was at $9,775 from $9,750 at the close on Tuesday, lead at $890 from $870 and tin was unchanged at $9,900.

Among corporate news, the world's top nickel producer, Russia's Norilsk Nickel, said it will halt for 12 days its Tati Nickel mine and concentrator in Botswana due to a furnace breakdown at a smelter.

Zinc traded at $1,147 versus $1,158 and saw its inventories climb 18,900 tonnes to 253,625 tonnes, its highest since May 2006.

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