China to fuel copper to $6500

An anticipated stockpiling by the world's largest consumer, China, is likely to push copper prices up to $6,500 a tonne.

Chinese stockists are expected to make the best use of the prevailing low prices of the metal to replenish their inventory.

Increased use of the stockpile had resulted in the decline of China's copper imports by 19 per cent last year. The inventories in warehouses of the Shanghai Futures Exchange slumped last week to 30,635 tonne, the lowest since last April.

Analysts believe copper prices are stabilising gradually in the range of $5,500-6,500 a tonne, which is reasonably lower than the record high of $8,800 a tonne on May 11 last year.

The prices have declined about 33 per cent from the May high, following low consumption by Asian countries. However, Chinese copper imports surged 11 per cent in December 2006, the first year-on-year increase since October 2005.

"Copper prices are settling down steadily between $5,500 and $6,500, which is a logical high in comparison to the cost of production at $3,000. Although the red metal price follows the international trend, it would largely gain in India following lower availability of metals amid intensified raids and searches by the excise department," said Surendra Mardia, vice-president, Bombay Metal Exchange.

"Unlike earlier, traders have started taking chances. Therefore, the trade volume may see a dramatic gain in the near future. If prices cross the barrier of $6,000, it would then easily touch $6,500," Mardia added.

Meanwhile, copper prices rose by $300 or 5 per cent last week due to higher industrial demand to settle at $5,805 at the weekend from $5,505 in the beginning of last week.

Inventory in the LME-registered warehouses also moved up by 1,075 tonne to 196,850 tonne last Friday from 195,775 tonne last Monday.

Price of copper for three-month delivery on the LME declined by 10 per cent in 2007 in anticipation of the first refined surplus since 2002, even as stockpile continued to rise rapidly.

According to the LME sources, the biggest consumer of the metal is the construction industry, accounting for 48 per cent of total demand.

The other users are the engineering, the electrical and the transport industries, which make up 24 per cent, 17 per cent and 7 per cent of the demand respectively.

In the Mumbai non-ferrous metals market, copper wire bar prices ended the previous week flat, indicating that traders are not keen on striking any deals. The metal gained 0.90 per cent to settle at Rs 338 a kg last

Friday from Rs 335 a kg in the beginning of the previous week.

Aluminium: Although aluminium prices gained 5.83 per cent on the LME to $2,870 during the previous week, the domestic market turned negative with the prices of aluminium slab marginally declining by 0.34 per cent to Rs 144.5 a kg.

Aluminium utensil scrap prices, however, gained 0.90 per cent to close the previous week at Rs 112 a kg.

Nickel: maintained its growth trajectory, making a gain of 1.29 per cent to $35,255 a tonne last week, owing to consistent demand from the stainless steel industry.

But, the rise in prices failed to percolate to the domestic market, resulting in a price decline of nickel cathode by 1.18 per cent at Rs 1,740 a kg last week.

Tin: on the LME and its slab in the domestic market moved hand in hand with a price decline of 1.62 per cent and 1.65 per cent to close last week at $10,650 a tonne and Rs 595 a kg, respectively.

Zinc: Similarly, zinc on the LME and zinc slabs in Mumbai settled 5.47 per cent and 5.80 per cent lower at $3,890 a tonne and Rs 211 a kg, respectively.

The early days of this week will be crucial in setting the market trend. The week will also decide the possible entry of Chinese players into the market to replenish their declining stocks.