Bulletins

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2011-May

MARKET COMMENTARY

After decreased to $ 8,503 a tonne in May, copper trimmed its losses during the month and finished above $ 9,000 a tonne, helped by expectations of higher demand from top consumer China, outweighing U.S. jobless claims data that signalled further slowing in the U.S. economy. Today benchmark copper on the London Metal Exchange was $9,024 a tonne at 1603 GMT, from $9,045 a tonne at the close of yesterday. The monthly average also went down 5.9% to $ 8,927.

The metal used in power and construction was also supported by news that nearly half of the contractors in a strike that halved output at the world's No. 5 copper mine, El Teniente in Chile had ended the stoppage. The metal fell to a session low of $8,932 after data showed jobless claims rose unexpectedly last week, and the European Central Bank's Jean-Claude Trichet signalled an interest rate rise is probably only a month away. "The jobs data was a little worse than expected, but I don't think that's a major surprise, we are definitely slowing down and we are going to start seeing poorer numbers over the next few weeks," MF Global analyst Edward Meir said.

"The other shoe will drop tomorrow when we get the Chinese numbers." China, which accounts for about 40 percent of global copper consumption, releases trade data on Friday. Its refined copper imports have slumped this year, but some market participants think underlying demand is still intact. "Base metal prices and especially copper will be supported by Chinese import data, which should be better given the sharp destocking over the last couple of weeks in Shanghai," said Daniel Briesemann, analyst at Commerzbank.

Behind predictions of higher imports are copper stocks in Shanghai bonded warehouses, which are said to have fallen by about 200,000 tonnes from April to between 350,000 and 500,000 tonnes now. "It looks like China is going to need more copper very soon, those stocks will need to be replenished," a LME trader said.


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2011-April

MARKET COMMENTARY


Copper dropped almost 3 percent in April after losing 4.2 percent in March. “China is slowing down,” said Phil Streible, a senior strategist at broker Lind-Waldock in Chicago. “There’s very little demand at the moment. Copper will be drifting lower slowly.”
  
At the beginning of April, copper was focused on inflation news from China. Copper fell in the market, capping the second straight monthly drop in April, on mounting concern that demand will slow in China, the world’s largest metals user. China’s central bank has raised lenders’ reserve requirements 10 times since the start of 2010 and boosted interest rates four times since October to rein in accelerating consumer prices and slow growth. Also, Chinese imports and exports data released on 10th April. “Chinese data looks much stronger than expected,” said Bart Melek, an analyst at TD Securities in Toronto. “There is now a concern that good economic data is actually bad, as it will embolden China’s government to raise interest rates much higher.”  While China’s overseas trade increased overall, imports of copper and copper products by the world’s biggest metals user fell 33 percent from a year earlier, customs data showed.
 
At the end of April, the commodities rout that knocked off $99 billion of market value last week is driving out speculators and leading Goldman Sachs Group Inc., which forecast the plunge, to predict a possible recovery. Commodities advanced, rebounding from the worst weekly plunge since December 2008, on signs that an improving U.S. economy may boost raw-material demand and on speculation that last week’s selloff was excessive.

Copper prices rebounded on 09th May, helped by a weaker dollar and as investors said last week's commodity selloff was overdone, especially in light of positive U.S. jobs data. Copper for delivery in three months on the London Metal Exchange rose 1.1 percent to $8,920 per tonne by, after touching $8,657.50 in the previous session, it’s lowest since Dec. 3.
 
The metal “seems to have reacted very positively to the payrolls data,” said Gayle Berry, an analyst at Barclays Capital in London. “When you tend to see these big sentiment- driven moves, they can reverse just as quickly as they happen.” Prices have slumped amid concern that higher interest rates will slow growth and cool metals demand in India and China, the world’s biggest consumer. “Much of the play in metals is a bet on China,” Edward Meir, a senior analyst at MF Global Holdings Ltd. in Darien, Connecticut, said today in a report. “With the government there tightening the screws in order to get control of inflation, there are legitimate concerns as to whether the authorities will press too hard.”
 
Now, looking ahead into May, Chinese economic data due out over the next two days will also be vital, particularly in terms of trying to gauge the effectiveness of the Chinese tightening measures. The Chinese Import-Export figures and Trade Balance for April, while the morning of the 11th April, sees the release of the CPI, PPI, Retail Sales, IP and FIA numbers. As far as market response is concerned, a combination of high inflation and lower than expected growth looks like being the worst option and would likely trigger further weakness as the government is forced to tighten further at the expense of economic output.



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2011-March

MARKET COMMENTARY

Copper market started to March with Chinese export and import data. London copper fell half percent after data from China  showed a rise in input prices in February and a drop in growth in manufacturing to a seven-month low on March 01. London copper was steady, as oil prices near 2-1/2 year peaks fanned fears of slower global economic growth and technical analysis suggested a period of consolidation between $9,780 and $9,942 at the beginning of month. Traders said high oil prices were keeping a lid on demand and prices below the record high of a couple of weeks ago in the short term. However, expectations of a supply deficit of half a million tonnes or more meant the bull-run was far from over. Oil rose the last day of first week in March as investors eyed growing instability in key Middle East oil producing countries, which could signal another threat to global supplies, after Libya's Muammar Gadaffi ordered airstrikes near Libyan oil facilities.  
 
The Middle East unrest is unlikely to derail copper's rally this year, but it is certainly putting pressure on prices now," said Guo Yong, an analyst at Jinrui Futures.  Also, he added about metals "Copper fundamentals remain positive, supported by upbeat data out of the United States and Europe. Consumption in China is also pretty good, even though spot prices are still in discount and exchange stocks increased." 
 
The Eastern Japan earthquake which hit northeastern Japan on March 11 is expected to strongly depress economic activities in the near term by way of outage at production facilities in devastated areas, limited power supply due to shutdown in nuclear power plants and parts-supply shortages in areas not directly affected. However, reconstruction demand stemming from earthquake/tsunami damage is likely to bolster the economy especially the metal market in the longer term as reconstruction of housing and infrastructure begins. When the details of earthquake/tsunami released by Japanese government, copper fell to a three-month low on March 15, following blasts at a quake-stricken nuclear plant in Japan which hit market sentiment and prompted liquidation of investments perceived as risky. After the big lost in the metal market, copper climbed for the first time in six days on expectation that reconstruction needs after Japan’s largest quake on record will boost demand in three to six months on March 16.
 
Most commodities are set to post gains for the first quarter of 2011 as political unrest in Africa and the Middle East sent prices soaring on worries about supply disruption and inflation.  However, the earthquake in Japan and resulting tsunami and nuclear crisis caused a sell-off that took many markets down from recent highs.
 
When the markets start to April, base metals fell on the first day in London, down 0.5 percent on average, led by copper's 0.7 percent slide in light trade during a two-day market holiday in China. Copper investors ignored positive U.S. jobs data released on April 01, which cheered equity and energy markets, with a second straight strong monthly read, suggesting a shift in the struggling labour market. The markets will closely follow details on the geopolitical uncertainties in the Middle East and North Africa and also recovery in Japan will be the most significant subject in April for the investors. 



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2011-February

MARKET COMMENTARY

At the beginning of February, London copper edged higher trading around $10,000 a tonne, but an earlier attempt to set a new high was thwarted, and the risk of retracement grew with bullish investors increasingly frustrated by the market's inability to press on. Copper has surrendered more than 3 percent of its value from the highs, as investors began to question whether the sky-high futures price was justified, given the sluggish state of physical market demand.  "There is significant scale-up selling interest each time prices get through $10,000. The market is overheated and there is little appetite in Asia at least to press ahead," said a trader in Hong Kong. 
 
Copper stumbled to three-week lows on February 17, as inflation worries and the demand-stifling effect of prices near record highs kept sentiment in check. Three-month copper on the London Metal Exchange traded at $9,745 a tonne from $9,843 a tonne. It fell to $9,705, its lowest since Jan. 31. "We have seen record highs, but you can clearly see that demand is cooling down a little on the current high prices. This is not just limited to copper but also for the others base metals as well," Commerzbank analyst Daniel Briesemann said.He also cited profit-taking for falling prices.
 
Three-month copper on the London Metal Exchange raised $90.75 to $9,515.75 a tonne on Feb. 24, after having touched $9,365, a near one-month low, in the previous session.  "Metals have decoupled from energy in recent days and the market is obviously worried about the inflationary impact of oil prices," said Edward Meir, analyst at MF Global in New York. "Energy prices are going higher with daily news of falling exports from Libya, but something has to give - either Gaddafi will be overthrown, which seems likely or the Saudis will pump more oil. Either way we should see a dip in oil and rallies in metals." U.S. crude oil futures raised more than $1 on Thursday 24, on mounting fears that unrest in Libya could spread to other oil producers in the Middle East and North Africa, while Brent touched a 2-1/2 year high of $113 a barrel.  The turmoil in Libya continued, as thousands of Libyans celebrated the liberation of the east of the country from the rule of Muammar Gaddafi, who has vowed to crush the revolt.  
 
Three-month copper on the London Metal Exchange traded at $9,908.50 a tonne on March 03.On the week, LME copper has 1.5 percent, on track for its first gains since the start of February. “Metals are moving again on oil. The gains in crude are a worry when it comes to growth, but to be honest, no one is taking on any big positions ahead of the jobs numbers," a trader in Singapore said.   "We've been burned too many times. The forecasts point to big numbers but the reports have had a tendency to disappoint. Maybe this time the surprise will be on the upside, but I am not betting on it." 
 
The big jump in the euro was potentially highly supportive for base metals, but there are concerns an interest rate rise, combined with higher oil prices, may be too much for consumers to bear and slow the economic recovery.  Market focus remains on the geopolitical uncertainties in the Middle East and North Africa in March. 


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2011-January

MARKET COMMENTARY

The copper price went from strength to strength in 2010, closing the year at $9,600. Supply disruptions in Latin America and the commencement of physically-backed copper ETFs were the main driving factors of the price gains as the year closed, though profit-taking has predominated in the first week or so of trading in 2011. After reached the record prices for all metals, a sudden drop in commodity prices prompted investors to take profits on Asian stocks while the U.S. dollar held firm ahead of job data due later in the first week of 2011, though the bull market in raw materials was seen as far from over.

When we came to the second week of January, copper opened the week on the downside the rebounded to level off at 9,620 $/ton. Key factors driving prices included European Debts Crisis and Chinese demand. All investors, traders, and analysts were focused on debt auction in Spain, Italy, and Portugal. Chinese foreign trade figures for December showed that copper import shrank 0, 8 percent in 2010.

London copper futures rallied to a record at $10,000 a tonne on 3rd of February, buoyed by bullish chart patterns and positive fundamentals stemming from optimism about China and the United States, which will push demand well above supply.

"Copper is very reluctant to test the waters above $10,000. Every time we get near, we recoil. We need something to kick us up a gear. That for now looks like it may have to come from the dollar, or U.S. data," a trader in Sydney said. On the other hand, the dollar rose versus the euro at $1.3798, trading short of a 2-1/2 month high.

Unrest in Egypt, after pro-government supporters clashed with protesters with deadly results, could help lift the greenback's safe-haven appeal, and cap the upside for many commodities. Trade was thin with many Asian markets closed for holidays some 560 lots of copper done, a quarter of the usual for the time of day, while winter weather in the United States may deplete the ranks of traders later in the day.

Underlying fundamentals for copper are positive, with analysts looking at a supply deficit of 800,000 tonnes, twice the amount of copper currently held in LME warehouses. But investors are concerned that copper's rally up 66 percent since June last year, has run ahead of itself. "Copper will be in short supply later this year and into 2012. The big deficits analysts expect will put pressure on stockpiles, but right now the market is pretty easy. Spreads are not particularly tight and copper is available at pretty low premiums," the trader said.

Mining companies have failed to keep pace with demand because new reserves are harder to find and metal from ore is declining. Copper supplies may lag behind demand by 822,000 tons this year, more than double last year’s deficit, according to Barclays Capital. With concerns about supply deficit in the market, Goldman Sachs Group Inc. predicted in October that copper would trade at $11,000 a ton in a year, while Standard Chartered Plc forecast in August that the metal may rise to $12,000 in the next two years.

Now, looking ahead into February, the price direction of copper will likely hinge on China’s demand after the Lunar New Year. According to some researchers, traders and hedgers, copper most likely will see upside action in February. At this time, there are strong resistance at $10,050 and support at $9,780.
 


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2010 - December

MARKET COMMENTARY


At the beginning of December, driving the market was a step in the right direction by the ECB, generally encouraging economic data and a slightly stronger EUR/USD. Base metals raised across the board on 2nd of December, especially copper were gained strongly. Last days of November, the most important subject (speculation) was reported by Wall Street Journal. According to news on Wall Street Journal, speculation abounds about the identity of the participant who controls 80-90% of the cash warrants on the LME at present.

Copper prices rose during the second week of December supported by Chinese buying and a firmer euro, discounting potential Chinese policy tightening and the end of a strike at a big Chilean copper mine. Moreover, on 7th of December copper broke through the psychological $9,000 mark and reached an all time high at $9,044.

The most significant data released by the General Administration of Customs of China on 12th of December. Monthly copper imports unexpectedly rose almost 30 percent in November, rebounding after a sharp fall in October and setting the stage for solid inflows in December too. Despite a significant amount of negative news about European zone debt crisis and the USA economy, copper got support from Chinese data, and hit its new record price at $9.211 a tone on 13th of December. Goldman Sachs added metals prices will diverge to follow their own fundamentals during 2011 as emerging market economies drive ahead and demand recovers in developed countries, pushing copper above $11,000.

As did copper in the market, Crude oil hit the record price in December, 2010. Oil steadied above $91 a barrel on 29th of December ahead of U.S. inventory data expected to show a drawdown in crude and distillate stocks due to severe weather in the world's largest oil user. Bullish money managers have stormed into the oil market, setting a fresh record high for net long crude positions on the New York Mercantile Exchange. When we evaluate the global markets, as everyone knows gold is the biggest winner. Gold gained 28 percent in 2010, and gold at $1,421.40 an ounce rose to record settlement price on 31th of December. London copper increased almost 8 percent in December, 2010 at $9.147 a tonne, when compared to LME average of November 2010. Also, LME (London Metal Exchange) copper futures gained 31 percent in 2010. Copper stocks in LME approved warehouses increased by 19.800 mt or %5, 6 during to course of December.

Now, looking ahead into 2011, the price direction of copper will likely hinge on supply, and mostly China demand, but it also depends on a couple of new market factors emerged just within the last year or so. According to some researchers, traders and hedgers, copper most likely will see a correction in the first quarter with some profit taking after the New Year, followed by some buying on the dip. Then, there would be a pullback in summer followed by a run-up towards the end of 2011.
The current level of resistance is $9,560 and support is $9,150. We are on the lookout for consumer price and industrial production index on 14th of January and other data for 2010.
 


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2010 - November

MARKET COMMENTARY

Base metals rose on Thursday, 2nd of Dec, with copper hitting a three-week high, on supportive economic data, supply fears and a weaker dollar. Three-month copper increased almost 2.1 percent in November 2010 at $8,469.89 when compared to LME average of October 2010, on the London Metal Exchange rose to $8,700 a tonne from $8,585 on Wednesday. The metal used in power and construction earlier hit a peak of $8,725, its highest since Nov.12 and about $250 shy of the record $8,966 touched last month.

"Today's moves are on the back of firm global equity markets, the good economic data we have seen from China and the United States and the weaker dollar," Commerzbank analyst Daniel Briesemann said. U.S. private sector payrolls rose by the most in three years in November, and its manufacturing sector showed growth was intact, adding to a slew of strong manufacturing data from China, India and European economies. The payrolls report lifted investor optimism about the U.S. job market ahead of Friday's government employment report. Worries about nearby copper supplies have pushed the premium for cash material over the three-month contract to around $60 a tonne -- its widest backwardation since October 2008.

A looming deficit in the copper market is expected to push copper prices next year above the record high. Bolstering this outlook, LME copper stocks have fallen steadily since February, last down 2,425 tonnes to 352,425 tonnes -- their lowest since October 2009. "Supply problems will play a major role not only in the short term but in the mid-term as well," Briesemann said. Investors were waiting to see if the European Central Bank will take more measures to calm euro zone debt concerns, when it announces the outcome of its policy meeting. The ECB is under pressure to help the euro zone contain a market retreat from one country after another. Hopes that it will rush through new anti-crisis measures, such as expanding its government bond buying, stabilised the euro and lifted stock markets.

In Chile, union leaders and management at the Collahuasi copper mine prepared to reach an agreement to end the longest strike at a major private Chilean copper mine. "Given the proximity to year-end and ongoing development of Exchange Traded funds, the sector and particularly copper will remain sensitive to supply disruptions and signs of a possible squeeze," Basemetals.com said in a note. Talk that physically backed exchange-traded products in industrial metals are imminent has dominated base metals markets, generating speculation about their effect on prices and demand.
 


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2010 - October

MARKET COMMENTARY

Copper hit 27-month highs at the beginning of this week, coming within striking distance of a record set in London futures, although the dollar's rebound weighed on New York prices of the metal. Benchmark copper for three-month delivery on the London Metal Exchange closed up $198 at $8,858 a tonne. During the LME session, it hit a high of $8,875 a tonne, not far from the record high of $8,940 touched in July 2008. On the COMEX division of the New York Mercantile Exchange, copper for December delivery settled up 2.2 percent at $4.0290 a lb after running up to $4.0475. But in after-hours trade, it fell to as low as $3.9275 per lb as the dollar climbed sharply, buoyed by higher U.S. bond yields.

Gold and crude oil also lost early gains on the dollar's rebound. "The selloff started because the market had gone too far, too fast," said Frank McGhee, head precious metals trader at Chicago's Integrated Brokerage Services LLC. He was echoing some analysts who said the rally in commodities had been overdone since the Federal Reserve said last week it hoped to bolster U.S. economic growth through a new round of monetary easing worth $600 billion.

"We don't see any chance that the United States, euro zone nations, or Japan would pull out of easy monetary policies any time soon, so inflation worries will continue to be a reason for speculative trades." Edward Meir, base metals analyst for MF Global in New York, concurred with that. "We suspect that lingering misgivings about the Fed's QE2 move (second bout of quantitative easing) is also fuelling the general aversion away from paper currencies and into hard assets," Meir said.

Copper fell 1 percent in London on 10th of Nov as the market retreated from near record highs under the weight of a firm dollar, weak Chinese import data and concerns recent commodity price gains were too steep. Three-month copper on the London Metal Exchange fell $88 to $8,770, off the previous session's 27-month high of $8,884, and the record price of $8,940 struck in July 2008. Benchmark third-month Shanghai copper dipped 0.6 percent to 67,290 yuan. China trade numbers came in on the soft side with October's imports of copper and copper scrap both down by about 25 percent from September.

Some of the support for copper prices came from a strike by union workers at Chile's Collahuasi, the world's No. 3 copper mine. The strike headed into its fifth day, with no sign of resolution. The mine's owners said deliveries had not been affected. But industry sources indicated they expected some impact soon on supply from the work stoppage. Worries about copper supplies in the near term pushed the metal into a $5 a tonne backwardation -- a premium for cash material over the three-month contract compared with a discount of $20 a tonne in late October.

London copper increased almost 7.6 percent in October 2010 at $8,292.40 when compared to LME average of September 2010. It has also risen $3,000 approx or 45 percent from June 08 to Nov 09. Standard Bank has raised its 2011 copper price forecast by $300 per tonne to $8,200 and maintained its predictions for higher levels for other metals next year.

The current level of resistance is $8884 and support is $8600.
 


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2010 - September

MARKET COMMENTARY

London copper hits new 26-mth peak, while tin hit a record high and other metals jumped, on expectations of further U.S. Federal Reserve monetary easing.

Three-month copper on the London Metal Exchange rose $108 to $8,283 a tonne and earlier touched $8,300, its highest since July 2008 (Copper hit a record $8,940 in July 2008).

"Copper is looking good, we have broken through some pretty tough areas ... and once again we are getting into areas that we haven't seen for a while," said Jonathan Barratt, managing director of Commodity Broking Services. He added that supply worries in copper and tin support sentiment, and commodities are attracting the attention of funds keen to put cheap cash to work.

Equities extended gains and the dollar held near lows after the Bank of Japan unexpectedly cut interest rates on 05th of Oct, fueling speculation that other central banks may take additional action to boost economies with cheap money.

Gold, silver and platinum prices also rallied to new highs -- a record peak for gold, three-decade high for silver and platinum's strongest in around five months. LME aluminium rose to $2,400.50, while zinc touched $2,336, the highest for both metals since April. Nickel rose to $24,995, its highest since May.

Chinese markets have been shut since Friday for week-long National Day celebrations and will open on Oct. 8. "The Chinese would be natural sellers into this kind of strength. But looking ahead to their return there is a risk they will try to chase prices, even though it goes against common sense," the Singapore trade said. When Shanghai closed last Thursday, LME copper stood at a little over $8,000 and since then it has rallied by around 3 percent.

London copper increased almost 5.8 percent in September 2010 at $7,709.30 when compared to LME average of August 2010. It has risen $1,000 or 14 percent from Aug 26 to Sept 30. In the same period, Shanghai Futures Exchange copper went from 57,100 yuan to 60,600 yuan, a rise of 6 percent. Goldman Sachs expects the price of copper to rise 40 percent by the end of 2011, with a 12-month forecast of $11,000 per tonne.

The current level of resistance is $8399 and support is $8190.
 


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2010 - August

MARKET COMMENTARY

Last Thursday, LME copper pared losses rising back to $7150 before the SHFE started trading. SH metal prices opened up strong, supported by the rebound in equity market and weak dollar. We saw substantial arbitrage buying interest from the Chinese. On Friday SHFE and LME markets were subdued. Prices moved within a narrow range in the morning. Midday, US Q2 GDP figures were better than expected raising the mood in the market, however keeping prices in their established ranges. Bernanke's speech prompted some choppy trading after investors digested his comments. The metals complex retreated only to sky rocket towards the end of the trading day, as shorts were covering their positions ahead on the UK bank holiday. Copper traded at $7448. Euro picked up to around 1.2760 and Dow Jones recovered to above 10000.

This week, LME metals rose, driven by the news of China Purchasing Managers' Index (PMI) rising in August to a three-month high of 51.7 from 51.2 in July. This indicates an improvement, even though moderate in the manufacturing sector. Copper made a significant break through $7500. Midday, US August ISM manufacturing figures came out better than expected, lifting the Dow Jones index to the high of 10264. The metals complex grew on the back of the spike in optimism. Copper traded at $7619 and touched a fresh four-month peak.

In August LME copper increased almost 8.1 percent at $ 7,285.93 when compared to LME average of July 2010. Today, 3M copper is traded in the range $7600-$7675. Following the overnight strength in LME, SHFE copper opened high at 60110 and the price rose to 60370 in the early AM session, but the upside was capped because market investors show some worries about the US employment data released on Friday.

The current level of resistance is $7700 and support is $7400.

Today we are on the lookout out for jobless claims, pending home sales and factory orders & durable goods data from the US.
 


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