The base metals were mixed on Tuesday. Copper fell during the pre-dawn hours, and a rally in New York wasn’t quite enough as it finished at $1.4837/lb., down 2½ cents from Friday.
Nickel was also down in the pre-dawn hours, but shot higher after New York opened and made it back to the green, closing at $5.0538/lb., up 21 2/3 cents. Zinc had a modestly down day, ending at $0.5424/lb., down less than a penny and a quarter. Aluminum sagged through most of the day, dropping 4¾ cents, to $0.6132/lb., while lead meandered widely but wound up just over a tenth of a cent higher, at $0.5142/lb.
Copper declined on a number of factors, including recession gloom and the big sell-off in the equities markets.
But the biggest driver was probably a huge runup in stockpiles. Copper inventories monitored by the LME skyrocketed by 15,425 metric tons yesterday, shooting past the 400,000 mark to reach 409,100 tons, the highest level since January of 2004.
“We expect continued inflow of metal into LME warehouses in 2009, and that this should keep a cap on prices,” said Greg Barnes, an analyst at TD Newcrest in Toronto. “Demand is expected to weaken at a faster pace than the miners can respond to.”
Output may top usage by 360,000 tons this year, Barnes said, predicting that the metal will drop to an average $1.40 a pound this year from 2008’s average of $3.12.
Supply exceeded demand by 50,000 metric tons in October, the International Copper Study Group said yesterday. The accumulated surplus came in at 159,000 tons for the 10 months ended October 31, up from 119,000 tons in the year-earlier period.
Also factoring in were concerns about China. That country’s urban unemployment rate rose last month for the first time since 2003, according to a government spokesman in Beijing, and that doesn’t bode well for industrial demand going forward. Nevertheless, China’s top copper refiner, Jiangxi Copper, announced that it plans to lift refined copper output 12% in 2009.
In company news, Zambian nickel miner Albidon, once a market darling, is reportedly on the verge of collapse as it struggles to reduce cost of production from the present $7/pound to $4 in an attempt to regain profitability.
And the juicy rumor du jour was speculation that BHP Billiton (NYSE:BHP) might announce the closure of its new $US2.8 billion Ravensthorpe laterite operation in Western Australia in its quarterly production report. Stay tuned on that one.
Source: Base Metals Mixed
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