Copper flat as positive LME Week sentiment offsets easing supply fears

LONDON - Copper was steady in thin trade, having spent the morning within a narrow range, with prices taking support from the relatively positive tone to LME Week, which has seen a number of analysts release positive forecasts for copper. Buoyant sentiment over long-term supply and demand fundamentals have underpinned prices, analysts said, and allowed the market to shrug off less price-positive news over growing stockpiles and the resolution of a strike at Southern Copper Corp in Peru. "Overall, although there has been some uncertainty about the short term, in the longer term people are generally positive (towards copper), and prices are taking some support from that," said Gayle Berry, an analyst at Barclays Capital. "Although some of the recent news has not been positive, there is still a feeling that Chinese buying could pick up," she added. At 2.25 pm, LME copper for 3-month delivery was down 6 usd at 8,175 usd. Speaking at the London Metals Exchange seminar which kicked off LME Week, Macquarie Bank analyst Adam Roley said copper prices could rise next year, with the market set to remain "very tight" as growth in mine supply fails to keep up with ongoing demand growth from China. Elsewhere, in a report prepared for LME Week earlier this week, Standard Bank said copper could rally above its all-time high of 8,800 usd in the first half of next year, on supply tightness, falling stockpiles, and continued strong demand from China. But although the mood towards copper has been relatively buoyant, in a report released yesterday, Capital Economics economist Julian Jessop argued that copper's bull run may be running out of steam. "The bullish case for copper is largely based on booming demand from emerging markets, led by China. But prices have increased by around 300 pct since 2003, so it is hard to believe this story has not already been discounted," he said. "Although copper prices have risen by around 30 pct since the start of the year, this increase has barely reversed the sharp falls in the second half of 2006. Given that the Chinese economy was strong throughout this period, such large swings both up and down confirm that buoyant Chinese demand alone is not sufficient for copper prices to rise." Continued strength in Chinese demand is also far from a given, he added. In the broader picture, a weaker dollar is again lending support to base metals across the complex, as metals traded in US currency become cheaper for holders of alternative currencies. Among other metals, lead was down 40 usd to 3,850 usd, consolidating after touching a fresh all-time high of 3,890 earlier in the session. Lead has rallied to a series of all-time highs after LME inventories fell to their lowest levels since 1990, caused in part by ongoing supply disruptions in Australia and China and strong demand from the battery industry. However, some analysts have cautioned that lead's recent surge may eventually be self defeating, as the battery industry looks to find alternatives to the heavy metal. Elsewhere, zinc climbed 28 usd to 3,093 usd a tonne, although the outlook for the metal remains negative, with most players convinced the market will be facing a supply surge next year that will push prices significantly lower. Meanwhile, aluminium climbed 12 usd to 2,478 usd a tonne, nickel was up 1,005 usd at 32,500 usd a tonne, and tin was flat at 16,000 usd.