Bulletins

Sayfalar: 1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9
2012-June

MARKET COMMENTARY 

The month of June in the markets could be best described as one of “false starts”, as repeated attempts to rally faltered-- until the very end. We first had something of a buildup at the start of the month-- ahead of Federal Reserve Chief Ben Bernanke’s testimony -- with many hoping that the chairman would finally acknowledge growing signs of economic weakness in the US economy and perhaps signal that additional easing was imminent. However, markets fell sharply in the aftermath of his remarks, as no such a green light was given. Next, European finance ministers huddled over the weekend of June 9-10, and announced a greater-than-expected €100 billion loan for wobbly Spanish banks, but the subsequent buying barely lasted a few hours in Asian traded before it fizzled as well. The bulls then thought they would get something going heading into the Greek elections held on June 17th, and when the results showed a relatively solid win for the pro-bailout parties, there was an initial burst of buying, but that barely lasted a day before the selling returned.

Copper ended June near a one-month high, but was down nearly 11% on the quarter, its worst showing since Q3 of 2011. Gold also finished at a one-month high, but was down 4% on the quarter, its biggest decline since September 2008. In the currency markets, the Euro ended the month higher, as did US equities, while US bond prices tumbled.

Last week’s European leadership summit resulted in a number of modest achievements, which surprised investors given the disarray evident in the run-up to the meeting. German Chancellor Angela Merkel was particularly adamant that austerity measures previously negotiated remain in place, but once the meeting started, she could not hold her ground. Her opponents bluntly told her they would withhold their agreement on other issues until they got concessions on lower borrowing costs and help for their banks. Not having French support -- previously provided by ex-President Sarkozy -- also took its toll on the German leader. By the end of the meeting, Merkel accepted a demand that European bailout funds could be used to recapitalize struggling banks, although she made this conditional on an acceptable banking supervisory body being put in place.

Last Friday copper had a stunning move, surging 4% for its biggest one day advance since November, but this was not enough to prevent the second quarter ending down by some 9%. Although we have seen further gains this week, the short-term outlook calls for some caution. For one thing, Chinese growth is slowing, with calculations by Reuters showing implied consumption down a sharp 5.5% in May. The latest Chinese copper import numbers were up from April, while Shanghai premiums have also pushed higher, but we don’t see either uptick as being solely demand-driven, as other variables (like the arbitrage and financing needs) are likely at play. Moreover, LME stocks have stopped declining over the course of June, as Shanghai holdings have moved out to take advantage of favorable differentials. Despite this mildly bearish backdrop, exogenous variables, such as a temporary reprieve in the European debt situation, coupled with increased anticipation about possible global easing, could propel prices higher over the short-term. So we can see a trading range of $7500 – $8000 over the course of July.

Copper dipped on Thursday on a stronger dollar, retreating from gains after a surprise rate cut by China and a similar move by the European Central Bank that had been widely expected. Metals initially climbed after China's second rate cut in a month, with investors hoping it would revive declining growth and metals demand in the world's biggest consumer of raw materials. But a slide in the euro against the dollar to a one-month low pressured metals priced in dollars, making it more expensive for investors in other currencies.

The slide came after the ECB cut interest rates to a record low but steered clear of more dramatic measures such as buying government bonds or flooding banks with fresh liquidity. Three-month copper on the London Metal Exchange fell 0.89 percent to $7,656 a tonne by 1434 GMT after earlier rising as much as 0.8 percent to a session high of $7,790 after the Chinese rate cut. "The market is trying to hunt for direction and using the same data to justify prices going one way or the other. It shows how uncertain the market is," said Standard Bank analyst Leon Westgate. "OK the Chinese cut rates (but) it takes several months to feed through, and the ECB has done what's expected so the focus has switched back to non-farm payrolls tommorrow."

U.S. data out earlier indicated Friday's non-farm payrolls report might beat forecasts. The data showed private employers added a surprise 176,000 jobs in June, while the number of Americans filing new claims for unemployment benefits last week fell by the most in two months. But analysts said a good number might dissuade the Federal Reserve from easing monetary policy further. Copper has rebounded about 4 percent since last Thursday, lifted by a European agreement on a surprise euro zone rescue deal and expectations that weak economic data would lead to fresh stimulus measures by global central banks. Some investors may have been disappointed at a lack of further stimulus measures by the ECB. "Today’s ECB interest rate cut does little to alter the bleak economic outlook and the bank is unlikely to announce any bolder unconventional measures for now," said Jennifer McKeown, senior European economist at Capital Economics. Investors are also keeping an eye on Friday's key monthly U.S. jobs report for clues on whether the Fed will take additional easing steps. Non-farm payrolls were expected to see an addition of 90,000 workers in June, with the unemployment rate holding steady at 8.2 percent.






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2012-May

MARKET COMMENTARY 

The crisis in the Eurozone is causing tremendous uncertainty. Events are not novelty and have largely followed textbook examples of financial crises. A lack of policy response has been a significant part of the problem. Even though Europe has a large share in global metals demand which has been contributing to a slowdown in global industrial production in recent months, is the primary transmission channel of the crisis to commodities. Spain’s banking system and the Greek elections are the most immediate problems hanging over the metals market and policy responses to these issues have different implications for metals. Markets are also waiting for a more comprehensive and strategic solution to the crisis.

Although Europe has not been the main driver of metal markets in the past decade, it has kept a steady share in global metals demand, so the current crisis is relevant for fundamentals. Nevertheless, as metals demand in the periphery has declined visibly, offtake especially in the North has by and large held up. This is one reason copper premia remain supported. Hence, we believe the primary transmission channel of the crisis in the Eurozone on the metals was through global sentiment and not actual European demand. The lack of sentiment has various implications. Global business cycle stages have for instance shortened markedly, which is a reason metal prices have been very choppy in recent quarters.

In May about $4.5 trillion was wiped from the value of global equities and the dollar climbed to the highest level in almost two years versus the euro as the turmoil in Europe spread. The dollar posted its biggest monthly gain since 2011 in May, beating bonds, stocks and commodities for the first time this year as investors sought refuge in U.S. assets while Europe’s sovereign crisis worsened. Global stocks had their biggest monthly losses since September, when Chinese manufacturing and German retail sales bolstered speculation that growth is slowing. Commodities fell the most in two years (copper fell 12 percent in May on the Comex in New York).

Copper started to June more stronger than May prices with the contribution of short covering and edged higher on Wednesday as the euro steadied against the dolar. But concern about contagion from the euro zone debt crisis and upcoming elections in highly indebted Greece kept investors cautious and prevented further gains for metals. Three-month copper on the London Metal Exchange rose to $7,470 a tonne, up 0.5 percent from Tuesday's close.

Base metals were supported by a slightly firmer euro against the U.S. dollar. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies. A 100 billion euro bank rescue plan for Spain earlier this week failed to calm nerves about debt contagion, and uncertainty remained about whether Greece will remain in the euro zone after its June 17 elections. Spanish 10-year yields, which hit euro-era highs of 6.86 percent on Tuesday, were seen rising further and testing the 7 percent level which is viewed by many as the point at which borrowing from capital markets becomes unaffordable in the long term. "The positive sentiment surrounding Spain's rescue seems to have faded. There is just too much uncertainty ahead of the Greek elections and the euro summit and investors are cautious," said Robin Bhar, analyst at Societe Generale. "Until we get some of these uncertainties resolved it is difficult to see why anybody would want to put risk on. Copper prices are likely to be volatile."

We believe the following events and announcement on the back of them are key during the month of June:

• 17 June: Greek elections,
• 18/19 June: G-20 meeting;
• 28/29 June: EU Leaders Summit





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2012-April

MARKET COMMENTARY  

On the surface it looks like China's imports of key commodities were weak in April, with crude oil, copper and iron ore all posting monthly declines. But one month's numbers don't tell the whole story and there are solid reasons behind the fall in commodity imports, and none really alters the base case that China is having a soft start to 2012 but is still a long way from a hard landing.

China's copper imports fell 18.8 percent to an 8-month low in April, preliminary official data showed on today, as a plentiful supply of the metal in the world's top copper consumer curbed its purchases on the international market. The monthly drop had been broadly expected and copper prices showed little strong reaction, while April imports were still 42.9 percent higher than a year ago.

China's copper consumption this year has been weaker than predicted, while the bulk of term shipment orders placed late last year for delivery in 2012 have arrived, lifting copper stocks in the world's second-biggest economy to a record. About 1.1 million to 1.4 million tonnes of refined copper is now stored in China, the highest since 2009, traders and sources at Chinese copper smelters have estimated. The stocks excluded the stockpile of the State Reserves Bureau. Owners of bonded copper stocks in Shanghai had already re-exported some stocks in April and large Chinese smelters agreed to export refined copper cathodes in May and June.

Arrivals of anode, refined metal, alloy and semi-finished copper products fell to 375,258 tonnes in April after dropping 4.6 percent in March to 462,182 tonnes, which itself was the fourth-highest on record.

Traders said weak demand and high stocks had encouraged Chinese importers to sell back partial term delivery of refined copper, the most popular class in the domestic and international markets, to overseas suppliers in April. Some of this metal was still in China last month and was being stored in duty-free bonded warehouses by the suppliers.

Chinese importers have also asked overseas' suppliers to delay or cut term shipments due to arrive in May because of high stocks of refined copper, they said. "I’m not surprised at April’s fall in copper imports given that Chinese demand in the second quarter has been softer than in previous years," said Yang Jun, analyst at China Futures Co. "The arbitrage window for imports into China was not open in April, so consumers who wanted to restock would have gone to the Chinese bonded warehouses where stocks are high," he added.

Copper prices quoted on the London Metal Exchange had touched a three-week low on Wednesday below $8,000 per tonne in London. For monthly basis, it had decreased 2.4 percent at $8,259.63 (-13 percent yoy) in April and the range was $7,885-8,703 per ton.

Today copper was steady and worries about difficulties Greece and Spain face in reducing their sovereign debt kept the red metal under pressure. Benchmark copper on the London Metal Exchange was at $ 8,033 a tonne by 0933 GMT, 0.3 percent down from a last bid of $8,053 on Wednesday.

"Copper is taking a breather after the heavy shake-up across markets we have seen in the past few days but there is still a lot of uncertainty out there: there are concerns about China, about the outlook for Spain, Greece and the euro zone," said Credit Suisse analyst Stefan Graber. Spain on Wednesday took over Bankia, one of the country's biggest banks, aiming to dispel concerns over the government's ability to clean up the financial sector. Greek Socialist leader Evangelos Venizelos will make a last- ditch attempt to form a government on Thursday and avoid a new election after voters rejected a bailout deal and pushed Greece into a political crisis. Unlike the macro outlook though, copper fundamentals pointed to a slightly stronger picture.

Copper inventories in LME-monitored warehouses fell to 219,850 tonnes, hitting a fresh 3 1/2 year low. In the short term, the copper price could remain under pressure, given that China’s import demand has had a major bearing on the price for long periods in the past," Commerzbank said in a research note. "Copper briefly dipped below the $8,000 a tonne mark yesterday to hit its lowest price for three weeks, though it recovered again overnight. It would appear that there is increased buying interest among market players at prices below $8,000 a tonne."







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2012-March

MARKET COMMENTARY  

Copper prices rose sharply in 1Q12, which was heavily influenced by the wider cross-asset rally. Nevertheless, this appreciation has come with a wrinkle, as fundamentals on the physical market did not strengthen to the same extent as prices on LME. Chinese physical premia have for instance been under pressure of late. This was partially influenced by a locational switch in stocks, i.e. metal taken out of warehouses in World ex-China (especially the London Metal Exchange) where shipped to inventories in China. Looking into 2013, we see scope for a ramp-up in production at several large mine projects.

China’s copper market is struggling with high inventories after a disappointing first quarter for the country’s biggest copper consumers. Tight credit conditions and a downturn in the construction and consumer goods markets have hit demand for the red metal, according to sector analysts. China’s leading copper fabricators and home appliance manufacturers have fared better than their smaller rivals in these tough market conditions. All market participants are now counting on the government to boost demand by relaxing bank lending rules or implementing some other kind of stimulus.

In the first quarter of 2011 LME copper increased 11 percent, but on daily basis it was a tight range between $8,250-8,650. In March it was more steadier than the first two months of this year.

Copper fell further below $8,000 a tonne to hit fresh three-month lows today, pressured by growing concern about slower demand from top consumer China, with Shanghai prices sliding more than 2 percent. A stronger dollar also weighed on the metal, as rising Spanish bond yields that revived worries over the debt-plagued euro zone, dragged down the euro to one-month lows.

Three-month copper on the London Metal Exchange fell as low as $7,885.25 a tonne, a level not seen since Jan. 13. By 0720 GMT, it was down 1.2 percent at $7,893, adding to a slide of 2.8 percent on Friday, when the Chinese data was released.

The data, which showed the Chinese economy growing an annual 8.1 percent in the first quarter, its weakest pace in nearly three years, fuelled a rash of selling, said Jonathan Barratt, chief executive of BarrattBulletin, a Sydney-based commodity research firm. "We have broken through some pretty heavy support levels in copper. When this happens, you'll see some funds selling," Barratt said.

"LME copper's fall on Friday triggered a lot of stop-losses, so Shanghai copper's reaction today is within expectation. Sentiment has been dampened by a slew of worrying Chinese data, while the fall of the yuan today after the widening of its trading band against the dollar didn't cheer up investors here either," said a Shanghai trader.

Soaring bond yields in Spain added to the gloom. Spain's banks increased their reliance on cheap loans from the European Central Bank in March, borrowing almost double what they did in February. The dollar rose to its highest in a month versus the euro as Spain's soaring bond yields rekindled worries about the fragile state of the euro zone's economy, sending Asian shares lower too. Spain's government bond yields rose and the cost of insuring its debt hit an all-time high on Friday, as record borrowing by its banks from the European Central Bank highlighted fears about the country's finances before it tests market appetite for its debt on Thursday.





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2012-February

MARKET COMMENTARY

While base metals have drawn support from generally positive macro developments, a weakening in the Chinese physical market so far in 2012 has given the complex pause for thought. Investors believe short-term price action will continue to reflect the tension between softer trends out of the Chinese market versus improving global growth momentum. As the Chinese economy reaccelerates from Q2 onwards, they generally anticipate a more positive period for price levels.

As last month’s focus highlights, the medium-term outlook for the base metals complex offers a somewhat differentiated picture. The most significant change of tack is expected in the lead and zinc markets, which will likely move from surplus to deficit. Conversely, the nickel market is expected to have the most significant weakening in fundamentals and, hence, a constrained price outlook. Copper and tin, the metals offering the most bullish stories of the past few years, will likely remain in this camp, albeit with a critical degree of supply tightness, as is currently the case.

Demand performance is anticipated to be generally stable across the complex over the next three years. An assumed stabilisation in the global economy will prevent any significant erosion in Western World demand levels, while historical per capita consumption trends suggest the rebalancing of China’s economy from investment to consumption will support solid demand growth for the majority of the base metals. Influences such as miniaturisation, substitution and end-product developments cannot be ignored, but do not appear to be overtly critical to market balances in this period.

The medium-term outlook for the copper market can be characterised as a mild easing in fundamental tightness. While 2012 is anticipated to see another market deficit, some brokerage companies expect a balanced market in 2013 and then surplus the year after. This headline story should not be depicted as bearish per se, given that the stocks-to-consumption ratio for the refined market will remain close to a record low of just above two weeks, which should in turn maintain relatively good support for prices close to the $9,000/t level.

Copper has risen around 11 percent so far this year, after a 21 percent slide in 2011, on a brightening economic outlook in the United States and hopes that easy monetary policies around the world would buoy asset prices. But the demand from China, which consumes 40 percent of the world's copper, is key to the outlook for prices. “The demand this year is not looking particularly good, as the cycle of rapid economic growth driven by fixed asset investment is over and export-driven growth is also easing," said Zhu Bin, an analyst at Nanhua Futures in the eastern Chinese city of Hangzhou.

Copper prices increased 5 percent in Feb and steadied on 15th of March, recovering after a 1 percent drop in the previous session, but concerns about the outlook for demand from top consumer China weighed on sentiment and kept prices within a tight trading range.

Prices for the metal used in power and construction have seesawed between around $8,400 and $8,600 this week, as investors weigh an overall improved global economic growth outlook against the disappointing copper demand recovery in China. "On the fundamental side you have two opposite forces - you have the U.S economy which is improving and on the other hand the demand in China is still weak so there is a lack of fundamental drivers," said Gianclaudio Torlizzi, partner at T-Commodity. Helping keep copper prices from falling further was a rebound in the euro, which bounced off one-month lows against the dollar, while European shares paused near eight-month highs. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.

On the technical side LME copper may fall to $8,342 per tonne, the 61.8 percent Fibonacci retracement on the rise from $8,176.75 to $8,608.75. A rebound from the current level may be capped at $8,481.50.



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2012-January

 MARKET COMMENTARY

After falling 21% in 2011, copper prices have risen nearly 13% ytd as fears about Europe ease and stabilization in Chinese manufacturing brighten the outlook. While equities have rallied 19% to start the year, expectations for lower prices in 2012 remain the consensus as global GDP growth slows and mine supply rises.

Last month some investors downgraded their demand and price forecasts and reiterated their view that the risks for both remained to the downside, at least in the short to medium term. The strong rally in prices during January has created a much more bullish perception of the market – prices have shot up 19% from the lows around $7,200/tonne in mid-December to $8,600/tonne in late January and early February. However, in our view, this strength is not built on the fundamentals, which makes the gains vulnerable. This doesn’t mean to say that prices won’t rally further – they may if central banks keep the liquidity taps open – but it does mean that prices have become disconnected from the physical fundamentals again. It is reminiscent of the situation a year ago, when QE2 drove copper to well over $10,000/tonne, despite a very troublesome macro and fiscal backdrop. Admittedly, the US is better shape now, but it is still vulnerable to contagion from Europe, where the crisis has merely gone from bad to worse. On the China front, although apparent consumption looks strong, real consumption is certainly not, and there are plenty of reasons to retain a cautious outlook for 2012.

For this week it was with very careful steps that the participants entered the market on Monday morning following Sunday’s late agreement where the Greek Parliament approved the country’s new loan agreement with the Troika. Out of 300 lawmakers, 199 voted ‘Yes’, while 74 voted ‘No’ and five voted ‘Present’.

This morning London copper was almost unchanged after slipped by nearly 4 percent from 5-month peaks of $8,765 a tonne reached last week, as investors took a cautious stance over Greece's approval of harsh austerity measures and traders noted scant buying from top consumer China. Three-month copper on the London Metal Exchange traded at $8,403 a tonne by 0757 GMT, down 0.26 percent from Monday's close, and retreating from modest gains early in the session.

Sharemarkets and the euro were showing some signs of risk aversion on scepticism that Greece's harsh austerity measures will be implemented and after ratings agency Moody's downgraded several smaller European nations and placed others like France and Britain on watch.

But the impact on metals was cushioned by copper's recent price decline, said Nick Trevethan, senior commodities strategist at Australia and New Zealand Bank. "You’ve seen a decent fall in prices in the last few days," he said. "It’s getting a little more attractive for Chinese purchases, although it’s still bit high for them to leap in with both feet." China is the world's biggest copper consumer, accounting for around 40 percent of refined demand.

Greece has admitted it still faces a tough job in persuading the European Union and IMF to save it from bankruptcy even after parliament approved savage extra budget cuts, provoking a night of looting and burning in central Athens.

Also tempering risk appetite, rating agency Moody's warned on Monday it may cut the triple-A ratings of France, the United Kingdom and Austria while it downgraded the ratings of Italy, Portugal, Spain, Slovakia, Slovenia and Malta.




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2011-December

 MARKET COMMENTARY

The manufacturing PMIs for December showed ongoing strength in the US and rebounds in China and India. However, weakness persists elsewhere in Asia, and of course in Europe which is where the main focus of concern for the coming year still lies. However, with January and February PMI figures clouded by the timing of the New Year holiday, it is a bit of a waiting game as far as Chinese economic data is concerned, with early April, and the release of the March PMI, the point at which better clarity may start to return in terms of the state of the Chinese PMI and underlying economy.

The base metals continue to react to wider macroeconomic factors, with firmer European equity markets. The flow of money, from the ECB lending facility to the banks and finally back into European sovereign bonds appears to have started, on the basis of auctions, easing some of the immediate fears over the Eurozone debt crisis. It is still a case of symptoms being addressed, however, rather than the underlying condition being cured, with the spectres of sovereign debt and capital adequacy at European banks stil overhanging the market.

Copper, which sagged 22 percent in 2011 and was traded between $7,131-$7,995 a metric ton in Dec, steadied this morning, following small losses in Asia, as European markets found firmer footing on the basis that the credit rating cut for nine euro zone nations by agency Standard & Poor's was already priced in. Three-month copper traded at $8,055 a tonne by 0944 GMT, from a last bid of $8,000 on the London Metal Exchange kerb close on Friday. Prices are up 6 percent so far this year.

"The downgrade hasn't come as a surprise. It was mooted on Dec 5," said Daniel Briesemann, an analyst at Commerzbank. “But because of new year holidays in China, the market will cool down and with the low liquidity we should also see lower interest and probably lower prices," he added.  Prices had declined in Asian trading because of a lack of purchases by Chinese consumers before the start of a week-long holiday in the world's largest user of the metal, and investor concern that European markets may tumble in reaction to last week's ratings downgrade.

Speculators in copper remained bearish, a bet they have held on to for almost 20 weeks, as demand prospects continued to be clouded by Europe's debt crisis and signs of slowing growth in top consumer China, U.S. Commodity Futures Trading Commission (CFTC) figures showed on Friday. They increased those shorts by 454 contracts to 2,465 lots.

Goldman Sachs said on Friday it expected upside for copper prices, citing greater supply risks and stronger fundamentals. But Standard Bank said it expected prices to fall, citing the sovereign debt crisis in Europe and the potential it will produce fallout around the world.




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2011-November

MARKET COMMENTARY

Another month, another EU Summit – the 12th now aimed at addressing the two-year old European crisis. Another deal was struck, but once again there was no magic bullet. The crisis rumbles on and the region continues to sink into recession. China is another concern, however, although struggling export markets and pockets of weakness in certain domestic sectors have seen manufacturing officially contract, the government has started to ease monetary policy now and we still think a soft landing will be successfully engineered. Elsewhere, the US economy has remained remarkably robust, and it now looks like a recession will be avoided.

Another supportive theme that has increasingly established itself over the past month is a surprisingly robust and resilient US economy. Although we thought that the US would fare better than Europe, we had previously considered that the likelihood of a mild US recession was 50/50. However, with the resilience demonstrated by a run of positive macroeconomic data, we think the risk of recession has diminished. Together with China having now paused its tightening cycle and perhaps already embarked on a monetary easing cycle, we have fewer worries about the demand side of the copper market in the short to medium term, at least outside Europe. Assuming the European crisis starts to eventually be brought under control and that a credit event can be averted, we stil expect to see a gradual improvement in prices for copper and all the base metals during 2012, as sentiment and risk appetite improve and the bullish underlying fundamentals in this market start to reassert themselves.

LME copper fell almost 3 percent on 14th of Dec as worries increased among investors that credit rating agencies might downgrade European countries as EU leaders have so far been unable to tackle a debt crisis which is denting metals demand prospects.

Risk aversion also pushed up the U.S. dollar, generally perceived as a safe-haven asset, putting more pressure on industrial metals prices. Copper fell almost 3.6 percent to trade at $7,305 a tonne, the weakest since Nov. 30, down from a close at $7,600 a tonne on 13th of Dec. The metal used in power and construction has lost almost a fourth of its value so far this year, after gaining for the last two years.

"The market remains substantially sceptical after the EU leaders' manoeuvre last Friday and it is still unclear whether the rating agencies will downgrade European countries and this is putting some pressure on metals," said Gianclaudio Torlizzi, a partner at metals consultancy T-Commodity. "However this price drop offers a good buying opportunity. This price level is very interesting for a short-term trade. What can cap prices though is the uncertain exchange rate," Torlizzi said.

Downgrades worries also made the euro slide to an 11-month low against the dollar. A stronger U.S. currency makes dollar-priced commodities such as base metals costlier for holders of other units. "The euro is taking a beating again and this is affecting copper; the outlook is negative at the moment " said an LME ring broker.


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2011-October

 MARKET COMMENTARY

The lower price environment of the past month following September’s steep sell-off has changed the fundamental landscape for the base metals. On the supply side, the marginal cost of production has been brought sharply into focus for some metals, albeit to varying degrees. Meanwhile, mounting fears over the Eurozone debt crisis has spooked investors, and sent consumers running to the hills. It isn't all bad however, with the lower prices resulting in a notable pick-up in both speculative and price-related consumer restocking. Again we have seen this in most of the base metals, and it is Chinese buyers who are by far the most active. However, it appears that it is largely merchants doing the bulk of the restocking, not Chinese consumers who are still constrained by tight domestic credit markets, as well as uncertainty about the short to medium outlook for export markets.

The main stories in copper over the past month have been about supply disruptions and Chinese merchant restocking. Both are supportive fundamental themes that have helped to counteract negative sentiment stemming for the ongoing European debt fiasco and banking crisis. No doubt they have contributed to the extreme volatility in copper prices, last seen during the 2008/2009 crisis. Copper prices breached September’s lows in October, touching $6,735/tonne on a closing basis at one point. However, even with marginal cost support still well below these levels,
strategic players taking a longer term view in these volatile markets – investors and Chinese trade buyers – are still reluctant to look at copper too bearishly.

On 10th of Nov copper fell as demand prospects dimmed amid a protracted euro zone debt crisis, though hopes that political deadlock in Italy and Greece may be easing kept falls in check. Zinc, tin, lead, nickel and aluminium also came off lows, along with world stocks and the euro, as Italian bond yields eased off levels seen as unsustainable, prompting investors to take on some risk. Italy moved closer to a national unity government on Thursday, following Greece's lead in seeking a respected veteran European technocrat to pilot painful economic reforms in an effort to avert a euro zone bond market meltdown.

Political and economic turmoil in Italy has spurred fears of a possible break-up of the euro zone with borrowing costs for Europe's third biggest economy at unsustainable levels and the 17-nation currency bloc unable to afford a bailout. "The firmer equity markets and the weaker US dollar is limiting the price fall in base metals. Base metals are cyclical commodities, if the economy is deteriorating you are better off with other commodities, probably gold," said Commerzbank analyst Daniel Briesemann.

Three-month benchmark copper CMCU3 on the London Metal Exchange fell to an intraday low of $7,357 per tonne, the lowest since Oct. 24. It was at $7,456 at 1455 GMT, down from Wednesday's $7,621 close. Copper prices have fallen about 22 percent this year. A weaker dollar lifted some of the pressure off metals prices. The dollar fell against a basket of currencies, making diollar-priced metals cheaper for holders of other currencies.



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2011-September

 MARKET COMMENTARY

We expected upside for copper to be capped in Q3 as the economic slowdown quickened. There is no doubt that the outlook deteriorated sharply during Q3, with the sell-off at the end of September suggesting that the market is now pricing in recessionary levels of demand. Demand is now the binding constraint. The supply-side constraints that have dominated the global copper market in recent years have slowly been pushed into the background.

While mine supply problems are an issue, they are occurring at a time of reduced demand, offsetting their impact. Meanwhile, consumers, particularly in China, have proved adept at operating on lean inventory levels, running down their normal working stocks, using scrap where possible and opportunistically going out to the market for a top up, if the price and conditions are right. This is evident in the decline in spot premiums in Shanghai (reflecting a decrease in physical demand) when copper traded above $10,000/mt earlier this year and the rise in premiums (reflecting improved demand) with prices below $8,500/mt.

In Sep, the copper price traded in the wide range between $6,800-$9,258 a metric ton and its monthly average went down 8.1 percent to $8,314. We saw the sharpest decline in Sep approx 25% and it decreased 35% from its record level, had reached $10,190 in Feb 2011.

Today copper rose for a second straight day in London as a worsening strike disrupted production at Grasberg, the world's second-biggest copper mine, offsetting concerns that the euro zone crisis may drag on and cause a demand slump. Freeport McMoRan Copper & Gold Inc halted copper and gold production on Monday at its giant Grasberg mine in Indonesia because of security fears and worker blockades, in the worst supply disruption since a strike began a month ago.
Three-month copper on the London Metal Exchange gained 0.9 percent to $7,611 a tonne by 1038 GMT, after climbing 3.2 percent in the previous session. It has risen nearly 8 percent in the last two weeks.

In Europe, leaders are facing growing pressures to contain the euro zone debt problems as the world's leading economies pressed them on Saturday to act decisively to resolve the crisis by Oct. 23. Signalling that euro zone governments are doing their best, German Finance Minister Wolfgang Schaeuble said on Sunday that the region's governments are trying to persuade banks to accept a larger write down on Greece's debt crisis. "The euro zone crisis remains the major worry. Even if leaders there come up with a plan to resolve the debt crisis, it will involve some sacrifice of banks there,which will have some negative impact on the markets at least in the short term," said Jinrui Futures analyst Zhao Kai.

This morning copper has touched $7,660 level, which is current resistance, however eased off to around $7,635. Some investors think that copper looks overbought and expecting a correction. Current initial support level is $7500, after that $7380.




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