"High Production Season"= boosting demand
Copper Advances as Dollar Declines, Boosting Investment Demand
March 17, 2010, 4:10 AM EDT
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March 17 (Bloomberg) -- Copper rose in Asia, extending an advance from a two-week low, as the dollar declined, increasing demand for the metal as an alternative investment.
Three-month copper on the London Metal Exchange gained as much as 1.7 percent to $7,530 a metric ton, and traded at $7,528.50 at 3:14 p.m. in Shanghai. The price reached $7,270 on March 15, the lowest level since March 2. The June contract on the Shanghai Futures Exchange rose as much as 2.4 percent to 60,200 yuan ($8,819) a ton and closed at 60,140 yuan.
The dollar dropped against a basket of six major currencies yesterday as the Federal Reserve pledged to hold rates near zero to safeguard the economic recovery, and extended that drop today. Commodities priced in the dollar usually move in the opposite direction to the currency.
“Further weakness in the dollar is expected,” Xiao Jing, an analyst at Beijing Capital Futures Co., said today. “That could spur buying and lift copper.”
The Dollar Index dropped as much as 0.2 percent to 79.563 today, after falling as much as 0.8 percent yesterday.
Aluminum increased 0.8 percent to 16,820 yuan in Shanghai and zinc gained 1.8 percent to 18,995 yuan.
“We fear the rally in Shanghai may not last too long as turnover wasn’t big and open interest decreased,” Jia Zheng, an analyst at Southwest Futures Co., said from Shanghai. Open interest refers to the combined number of buy and sell positions.
‘High-Production Season’
“Still, the metals are less likely to fall these days as we’re heading into high-production season,” Jia said, referring to the seasonal pickup in Chinese manufacturing that comes during the spring and summer months.
Among the three Shanghai nonferrous metal contracts, “we favor zinc because of demand from the auto sector and we dislike aluminum because of huge inventories.”
Stockpiles of aluminum monitored by the Shanghai exchange are 387,549 tons, the highest level since at least 2003. Total inventories, including those not covered by the exchange’s survey, may be more than double that amount, according to researcher CBI China Co.
In London, nickel climbed as much as 1.8 percent to $22,284 a ton. BHP Billiton Ltd., the world’s biggest mining company, halted production at its Kwinana nickel refinery in Western Australia on March 15 because of a lack of hydrogen gas.
Aluminum gained as much as 0.8 percent to $2,276 a ton, zinc rose as much as 2 percent to $2,354 a ton, lead increased as much as 2.6 percent to $2,276 a ton, and tin advanced 0.7 percent to $17,675 a ton.
--Li Xiaowei. With reporting by Jason Scott in Perth. Editors: Jake Lloyd-Smith, Aaron Sheldrick
To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net