METALS-Copper surges to 4-1/2 month high after Fed stimulus

Fri Sep 14, 2012 11:59pm IST

* Fed stimulus plan propels copper, metals to multi-month highs
    * Copper up over 10 pct over past two weeks
    * Commodities in next leg of super-cycle - analyst
    * Coming up: U.S. Empire States Manufacturing Index Monday

    By Chris Kelly and Harpreet Bhal
    NEW YORK/LONDON, Sept 14 (Reuters) - Copper rallied Friday to its highest
level in 4-1/2 months on the prospects of a demand boost from a new round of
monetary stimulus from the Federal Reserve to boost the world's largest economy.
    Gains spanned the base metals complex, with markets from aluminum to
zinc all scaling multi-month peaks alongside a rise in risk appetite
across financial markets after the Fed said on Thursday it would pump $40
billion into the U.S. economy each month until it saw a sustained upturn in the
weak jobs market. 
    The Fed's aggressive plan enhanced what was an already upbeat mood in
financial markets since the European Central Bank (ECB) announced plans to cut
the borrowing costs of struggling euro zone members.
    "It's the concerted effort between the ECB and the Fed ... more
accommodation means more money floating out there in these various economies to
try and get them jump-started," said Michael K. Smith, president of T & K
Futures and Options Inc. in Port St. Lucie, Florida.
    COMEX copper for December delivery shot up by 12.25 cents or 3.3
percent to settle at $3.8325 per lb, just shy of its intra-day peak at $3.8380,
which marked its priciest level since May 1. The day's low was $3.73.
    COMEX volumes rose above 57,000 lots in late New York trade, nearly a third
above the 30-day norm, according to preliminary Thomson Reuters data.
    At the London Metal Exchange (LME), three-month copper peaked at
$8,411 a tonne, another high dating back to early May. It closed up $305 at
$8,380.
    "It's clear that the markets have taken a very positive view on the Fed's
action last night, and we have seen a strong move up today in markets," said
Ross Strachan, economist at Capital Economics.
    Copper prices rose over 5 percent this week, bringing its gains over the
past two weeks to more than 10 percent -- the biggest two-week rise since
November last year.
    Even so, some traders and analysts doubted if the rally could be sustained
for long as downstream copper demand in China remained sluggish. 
    Still, others believed the recent actions by the ECB and the Fed, as well as
China's approval of a $157 billion infrastructure plan could set the stage for
the next leg higher.
    "What has happened is hugely bullish ... this is the next leg of this
commodity super-cycle," said T & K Futures' Smith.
    He expected copper prices to pull back early next week in consolidation from
the recent rally, but then push higher on follow-through buying.
    "If it pulls back 15 to 20 cents next week, people are going to jump on it."
    
    EURO ZONE
    The spotlight turned again on the euro zone, as finance ministers will
discuss on Friday if Spain should ask for financial support after the ECB's new
bond-buying program brought Madrid's borrowing costs lower. 
    "We have seen markets take a relatively positive view on recent developments
in the euro zone," Strachan said.
    "But as we have seen in the past ... the initial optimism has often
dissipated very quickly and markets have slipped back as the reality of the
underlying weakness in those economies comes to the fore." 
    In other metals, LME aluminum rose $93 to finish at $2,195 a tonne,
after touching its highest since late March at $2,199.  
    In China, aluminum profile manufacturers in Guangdong have reported a rise
in orders this month, after a decline in order books in the past 3-4 months.
Analysts and industry sources see this as a sign of recovering demand.
   
    Tin rallied $1,325 to end at $21,675 a tonne, its highest since
early May.
    Indonesia's biggest tin miner PT Timah forecast production would
be at least 38,000 tonnes this year, an official at the state-owned firm said on
Friday, little-changed from the previous year. 
 
 Metal Prices at 1805 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       382.75       11.75     +3.17     343.60     11.39
  LME Alum      2200.00       98.00     +4.66    2020.00      8.91
  LME Cu        8380.00      305.00     +3.78    7600.00     10.26
  LME Lead      2264.00      106.50     +4.94    2035.00     11.25
  LME Nickel   17775.00     1025.00     +6.12   18710.00     -5.00
  LME Tin      21675.00     1325.00     +6.51   19200.00     12.89
  LME Zinc      2116.00       80.00     +3.93    1845.00     14.69
  SHFE Alu     15835.00      175.00     +1.12   15845.00     -0.06
  SHFE Cu*     60470.00     2220.00     +3.81   55360.00      9.23
  SHFE Zin     15760.00      485.00     +3.18   14795.00      6.52
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
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