Copper rally likely to drive up base metal prices

MARKET OUTLOOK

Copper is likely to drive up prices of base metals next week as the possible disruptions in supply from Chile "� the world's largest copper-mining country "� may lead to global scarcity.

Although analysts are sceptical of the red metal exceeding the all-time high of $8,975 a tonne it hit on the London spot market on March 6, they are confident that short-term traders would benefit from huge demand from China, the world's largest consumer.

China's sudden spurt in imports of copper was unexpected as the preparation for Olympic Games 2008 is nearly over. The country's continued effort to improve infrastructure is fuelling additional imports.

"The China factor should not be considered in isolation for driving up prices as the current level cannot be justified fundamentally," said Jayant Manglik, head (commodities), Religare Enterprises.

In India, the total imports of copper advanced 6 per cent in March at 240,634 tonnes as compared with 226,980 tonnes in February this year. In March 2007, the imports stood at 307,723 tonnes.

Meanwhile, Chile is facing an energy shortage due to fall in natural-gas supplies from neighboring Argentina and a drought that cut hydropower output.

"There is no indication that prices will soften in the global metal markets as copper rates have shot up 29 per cent so far this year as traders bought the metal as a hedge against inflation," said a Mumbai-based copper trader.

In contrast, Manglik says traders should be cautious on the calls they take. "Every spike should be a profit booking opportunity at this stage," he added. The US economic slowdown may ease prices of all commodities with base metals being no exceptions.

On Friday, copper rose in London on speculation that a weaker dollar will spur demand for raw materials. The dollar has dropped 6.3 per cent against all major currencies this year. Copper futures for May delivery gained 0.3 per cent to $3.9365 a pound in early Friday trade on the exchange.

Stockpiles of copper monitored by exchanges in London, Shanghai and New York have risen 0.4 per cent to 184,864 tonnes, or equivalent to 3.6 days of global consumption, last week.

Tin inventories, on the other hand, dropped 2.9 per cent to 8,180 tonnes, the lowest since May 11, even as prices have dropped by $50 to $20,700 a tonne.

Lead soared 53 per cent in 2007 and traded at a record $3,890.15 a tonne in October. On Friday, the metal closed with a marginal $42 weekly gain at $2,948 a tonne.

Aluminum surged 6.46 per cent last week to $3,030.5 a tonne while nickel fell less than one per cent on low buyer turnout. Zinc pared gains after hitting a high of $2,362 a tonne and ended the week at $2,290.