BLBG: London Copper Rises From Four-Year Low as Plunge Seen Overdone
By Li Xiaowei
Dec. 19 (Bloomberg) -- Copper rose in Asia, after falling yesterday to the lowest in four years in London on deepening recession concerns, as some investors view the drop as excessive.
London copper has declined 8.7 percent this week as the exchange-monitored stockpiles have risen to 324,175 metric tons, the highest since February, 2004. Canceled warrants, or metal booked for withdrawal, totaled 4,775 tons.
“Investors are closing sell positions to lock in profits, causing today’s rebound,” Wang Lei, an analyst at Haitong Futures Co., said from Shanghai. “The unrelenting gains in inventory and the extremely low ratio of cancelled warrants to total stockpiles indicate weak fundamentals are here to stay.”
Copper for three-month delivery rose as much as 1.4 percent to $2,920 a ton on the London exchange after yesterday dipping to $2,860, the lowest intra-day price since December 2004.
Copper for March delivery on the Shanghai Futures Exchange closed 1 percent down at 22,640 yuan ($3,311), after falling the 4 percent limit from the previous settlement price to 22,320 yuan in the morning, the lowest intra-day price since December 2003.
The metal used in electrical wiring and plumbing is down 57 percent this year and headed for its first annual decline since 2001. Stockpiles monitored by the London exchange have increased 64 percent this year.
‘Downside Potential’
“Copper is the metal we would identify as having the furthest downside potential from current levels” as supply picks up in the face of falling demand and as prices are above production costs, Barclays Capital analysts led by Gayle Berry said in an e-mailed report today. “There is a growing risk that copper could also dip near to this level at $2,100 a ton.”
Global copper production exceeded demand by 30,600 tons in the 10 months ended Oct. 31, the World Bureau of Metal Statistics said Dec. 17.
Pan Pacific Copper Co., Japan’s biggest copper smelter, may deepen production cuts at three domestic plants after the January to March quarter because there is no sign of a recovery in demand.
Among other LME-traded metals, aluminum was down 0.7 percent at $1,483 a ton, zinc declined 1.4 percent to $1,090, lead slid 0.5 percent to $920 and nickel added 0.3 percent to $9,800.
To contact the reporter for this story: Li Xiaowei in Shanghai at xli12@bloomberg.net
