From: Reuters
Published January 27, 2008 11:43 PM

Snow, holidays drag Shanghai copper down 2 percent

By Nick Trevethan

SINGAPORE (Reuters) - Shanghai copper fell nearly 2 percent on Monday as heavy snow in parts of China and next week's long holiday slowed demand, while investors elsewhere braced for a busy week of data that could wreck budding market confidence.

The April copper contract, the most active on the Shanghai Futures Exchange, fell 1,180 yuan to 59,090 yuan ($8,214) a tonne at the midday close, despite a one-third fall in stocks last week to their lowest since mid-2005.

"Heavy snow in mainland China is hitting base metals demand. Adding to that are the New Year Holidays next week which mean some manufacturers are closing their factories early because they can't get metal," a trader in Shanghai said.


"But, after the break, demand should rebound," he added.

Analyst Pang Ying at trading house Rongtop said: "I think buyers are worried by high copper prices and most of them are taking a wait-and-see position, hoping for price falls in the future."

Spot copper prices in Shanghai fell 975 yuan a tonne, trading between 61,150 yuan and 61,500 yuan. The spot premium was hovering around 600 yuan a tonne in Shanghai, compared with about 800 yuan late last week.

Copper for delivery in three months on the London Metal Exchange fell $50 to $6,980, but prices are well up from last week's $6,675-low.

"The general consensus is that this fairly positive momentum will last until the Chinese New Year. Then we might see a bit of a correction, before the return of the Chinese, when things could rebound," an LME trader in Singapore said.

But he added: "If the data doesn't come in as expected, we could see the trend derail."

The dollar dipped slightly against the euro, supporting commodity prices ahead of the Federal Reserve's rate decision on Wednesday.

Interest rate futures suggest about a 72 percent chance of a half-point cut in the Fed funds rate, down from a 100 percent chance seen in the middle of last week.

New U.S. home sales data for December later on Monday and building permits on Tuesday are likely to set the early tone for metals this week, which will be rounded off by GDP numbers for the fourth quarter as well as non-farm payrolls.

Shanghai aluminum <SAFJ8> gained 0.4 percent to 18,870 yuan.

China will keep a tight grip on investment in 2008, especially in industries that consume a lot of energy and cause pollution, Zhu Hongren, deputy head of the economic cooperation bureau of the National Development and Reform Commission, said.

He added that Beijing would also restrict exports from these sectors.

Dealers said that could mean higher export taxes on primary aluminium, sometimes called "congealed energy" because of the large amounts of electricity that are needed to produce the metal.

"We could see higher export tariffs. Aluminium producers use a lot of energy and the government is not happy seeing the sector expand continually," the first trader said.

"From the industry side, they will try and expand capacity and make money from the export market for as long as they can, but as taxes increase, we could see China exports slowing further and we could become a net importer."

Terms of Use | Privacy Policy

2017©. Copyright Environmental News Network