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Nickelless
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 Posted - 10/28/2008 : 00:46:13
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Copper bounced 6.6 percent and other metals jumped on Monday in a short-covering rally triggered by better-than-expected housing data from the United States.
In early trade, the metal -- often seen as a key gauge for real economic activity -- fell almost 5 percent to a three-year low on a firmer dollar and concerns over global demand growth. "The new house sales data kicked off a short-covering rally," Citi analyst David Thurtell said.
"The bottom line is the market for all these metals is so short so investors are booking some profits covering some of their short-positions," Thurtell said.
A U.S. government report showed a surprise increase in September new home sales, tempering worries about prospect of a deep recession.
Three-month copper MCU3 on the London Metal Exchange jumped 6.6 percent to a high of $4,025 a tonne before closing at $4,020. In early trade, the metal, mainly used in the construction and power industries, hit a three-year low of $3,590 -- down 4.9 percent against Friday's close of $3,775.
"Copper has been oversold," said a trader at the LME. "The market is short."
The three-months copper contract last week posted its biggest weekly fall -- more than 20 percent -- since at least 1977, according to Reuters data. It has slumped nearly 60 percent since July's record high of $8,940.
"It should be another volatile, nervy week ahead," said Calyon analyst Robin Bhar. "Already we have had huge volatility across all markets and it's set to continue."
After a volatile trading session European shares fell to a 5-1/2 year closing low, with the FTSEurofirst 300 index of top European shares down 1.8 percent at 814.78 points.
Top consumer China's implied copper consumption rose 5.3 percent in September from the previous month, but collapsing prices suggest demand is softer than it appears.
"Implied demand calculations in times like this are pretty meaningless. Those import orders were placed up to a year ago, and it's difficult to believe in the face of these prices that consumption is growing at these rates," a trader in Sydney said.
SUPPLY RESPONSE
Calyon's Bhar said there also has been very little in terms of output cuts by producers to balance the fall off in demand.
"Producers can be cash negative but if they are making enough to pay debt and finance then they will soldier on," he said. "No one wants to be the first and historically you don't tend to see cuts for several months. We could go into 2009 before seeing substantial cuts."
In early trade these demand concerns and a firm dollar pushed base metals, except tin, lower with aluminium hitting a three-year low.
The dollar hit a two-year high against the euro, making dollar-priced metals more expensive for holders of other currencies.
Aluminium MAL3 recovered at the close, up at $2,038/2,039 a tonne versus $1,975 on Friday. The metal, used in power and construction, earlier declined to $1,925, its lowest price since October 2005.
Western world unwrought aluminium stocks fell to 1.657 million tonnes at the end of September, compared with 1.707 million in August, industry data showed.
Zinc MZN3 dropped 6.4 percent to an intra-day low of $1,090 a tonne before bouncing to $1,185, up $20.
Lead MPB3 recovered at $1,295 from Friday's $1,270 after earlier diving as much as 7.9 percent to $1,170, while nickel MNI3 also bounced to $11,110, after hitting a low of $9,300 earlier from $10,000 on Friday.
It hit a 10-day high of $11,200 earlier, up 12 percent.
Tin was higher as China stepped up its regulation of the metal and as LME stocks fell to more than three-year lows. Tin MSN3 rose 15.7 percent to $13,600 -- the highest since Oct.17., compared with $11,750 a tonne at the close on Friday. China, the world's second-largest tin producer, has set new qualifications for tin exporters as part of efforts to tighten sales overseas.
Tin inventories in LME warehouses dropped 500 tonnes to 4,080, the lowest level since July 2005.
Metal Prices at 1705 GMT
Metal Last Change Pct Move End 2007 Ytd Pct
move
LME Cu 4010.00 235.00 +6.23 6670.00 -39.88
SHFE Cu* 32540.00 -1360.00 -4.01 56880.00 -42.79
LME Alum 2035.00 60.00 +3.04 2403.00 -15.31
SHFE Alu* 13700.00 -50.00 -0.36 18180.00 -24.64
COMEX Cu** 169.50 2.00 +1.19 303.05 -44.07
LME Zinc 1170.00 5.00 +0.43 2370.00 -50.63
SHFE Zinc* 8840.00 -370.00 -4.02 18950.00 -53.35
LME Nick 11000.00 1000.00 +10.00 26350.00 -58.25
LME Lead 1295.00 25.00 +1.96 2550.00 -49.22
LME Tin 13300.00 1550.00 +13.19 16400.00 -18.90
** 1st contract month for COMEX copper
* 3rd contact month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
(Editing by Karen Foster)
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Copper bounces 6.6 percent after U.S. housing data
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