Copper off Slightly as Chilean Strike Worsens
Apr 19th, 2008 | By Doug Casey | Category: Gold MarketThe base metals were mixed on Friday. Copper pushed above the $4 level in the pre-dawn hours, but once again was unable to hold there, as it fell sharply through the first hour of the New York session, but then came off its lows to finish at $3.9512/lb., down less than 2 cents. Nickel followed a similar pattern that saw it plummet to below $12.90 before rising into a close at $12.9962/lb., down 16¾ cents. Zinc prolonged its slide, ending at $1.0163/lb., down more than a penny. Aluminum fell prior to the open but then came back aggressively to regain positive ground at $1.3711/lb., up more than a half-cent, while lead also had a good day, advancing to its intraday high of $1.3035/lb., up more than 3½ cents.
Copper ended the week on a down note, wrapping up the biggest weekly loss in a month as the strengthening dollar made the metal less attractive to investors holding foreign currencies.
“A firmer dollar appears to be playing a role in base (metals), and with relatively elevated base metals prices, thin trade and no sign of any urgent consumer demand, only renewed US dollar weakness or further production disruptions will keep metal prices supported,” said UBS analyst John Reade.
The reallocation of capital is also playing a clear role, as traders place bets that equities have made their bottom.
“Equity markets are trading in the black this morning as investors increasingly gravitate towards the view that the worst of the financial markets difficulties are behind the main players,” said JP Morgan analyst Michael Jansen.
“A view that the credit market crisis is fading would be broadly U.S. dollar-supportive and help to chip away at the gains made in commodity prices,” Jansen added.
Nevertheless, fundamentals watchers see the bull market running on. “We expect 2008 to be another year of sluggish supply growth,” Barclays Capital analysts wrote yesterday.
And there will inevitably be disruptions such as are now occurring in Chile. State-owned Codelco, the world’s largest producer, has already closed two mines because of strike-related violence, and more closings may follow, the company says.
If “we see a clear risk to people’s lives and safety, we are going to have to halt operations, not just at the request of union leaders but as a management decision,” said Codelco vice-president Daniel Barria.
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