Next Price Prediction for CopperBorrowed from another board
Copper is golden with record price
Sets mark as investors bet China may have to cover a losing position worth as much as $200M.
November 17, 2005: 7:53 AM EST
LONDON (Reuters) - Copper prices hit a new record high on the London Metal Exchange (LME) Thursday as investors gambled that China, despite denials, may be forced to cover a big, loss-making position worth as much as $200 million.
"The market is completely focused on China, but there is a lot of smoke and mirrors -- no one really knows what the true picture is," a trader said.
"Funds may be adding to their positions again," another LME trader said.
Three-month copper futures (MCU3) touched a record $4,185 a ton, recovering from a near three percent slide early Wednesday.
By 6:13 a.m. ET, copper had settled at $4,162/4,167 versus $4,140 at Wednesday's close.
Traders blamed the volatile conditions on China.
China's State Reserves Bureau (SRB) is the focus of market speculation that a trader working on its behalf had taken out a huge 150,000 to 200,000 ton bet that copper prices would fall, at a time when it has been climbing to record highs.
Despite repeated public comments by the normally secretive SRB that it will intervene by selling up to 500,000 tons of its 1.3 million ton copper stockpile to cool prices, prices have hit record levels as investors call the agency's bluff.
On Wednesday traders said China, the world's biggest copper importer, was seeking through the SRB to export up to 200,000 tons of copper, or more than three times the stocks in LME warehouses worldwide.
China has said any position, if it does exist, was taken privately by a trader and is not held by a Chinese government agency.
Traders said it was logistically unlikely that such a quantity could be shipped from China to the LME's Asian stores in time to deliver against any short positions in December.
"This to me is confirmation that they are indeed short, and by quite a large scale, if they are seeking to release this material," said metals analyst Ingrid Sternby at Barclays Capital.
"China is a big net importer of copper and for them to seek to export 200,000 tons of metal is not logical unless they are short and need to cover," she said.
Sternby said this was a bullish development and set her next price target at $4,500.
Other analysts say the rally is drawing to an end.
"We believe the copper price is living on borrowed time and the footsteps of the debt collectors can be heard coming down the street," ABN AMRO said in a report.
It said copper would be in surplus by around 600,000 tons in 2006.
Maqsood Ahmed, analyst at Calyon Corporate and Investment Bank, has said he saw prices slipping to $3,330.
Overnight the International Copper Study Group (ICSG) said copper was expected to register a deficit this year of some 120,000 tons, swinging to a 300,000-ton surplus next year.
The ICSG sees total annual copper use for 2006 at 17.36 million tons.
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