PT: Copper prices lift on supply disruptions, weak dollar
Copper futures were higher in London on Monday, as supply disruptions in Chile and the US interest rate decision continued to boost the price of the industrial metal.
The London Metal Exchange's three-month copper contract was trading up 0.3 per cent at $US5,271.50 a ton in midmorning European trade, having hit a two-week low earlier in the session at $US5,208 a ton.
An earthquake in the world's largest copper producer, Chile, upset operations at two key mines early last Thursday and has continued to stoke fears about supply. Later that day, the US Federal Open Market Committee voted to keep rates unchanged.
"Copper prices [are] rising this morning as...some key copper mines paused production last week to give time for engineers to check their operations," said SP Angel, a brokerage, in a research note. "The US Fed's decision to hold rates also weakened the US dollar, helping prices push higher."
Copper is a dollar-denominated commodity, and it becomes cheaper for other currency-holders to buy when the greenback weakens.
Despite the earthquake in Chile, some analysts say that supply remains robust and copper production will outpace demand in the medium-term.
"Outright production curtailments, the most effective measure to rebalance oversupplied markets, have been few and far between," BofA Merrill Lynch said in a report. "As such, we forecast surpluses all the way to 2018 at present."
Economic weakness in China, which consumes roughly 45 per cent of the world's copper, is also still unsettling market participants. According to Barclays, a survey by Chinese metals research firm, Antaike, revealed the continuing weakness in key sectors of downstream copper demand.
Others in the market, however, see copper prices moving higher on the back demand from China.
"We expect renewed demand out of China to lift prices further following the restart of industry following the WWII parades two weeks ago," said SP Angel.
Most of the other base metals were higher at the start of the week. Aluminum was up 0.1 per cent at $US1,625 a ton, zinc was down 1.4 per cent at $US1,665 a ton, nickel was up 1.2 per cent at $US9,795 a ton, lead was down 0.6 per cent at $US1,683 a ton and tin was up 0.2 per cent at $US15,200 a ton.
