* Some carmakers, other buyers lock in copper to 2017, 2018
* Analysts expect low prices to last for short time only
By Susan Thomas and Harpreet Bhal
LONDON, March 13 European metal products
manufacturers are seeing the most favourable conditions for
buying copper in over two years as prices drop and the euro
strengthens, and some are buying forwards to lock in cheap
Copper had been in freefall for three straight sessions,
touching its lowest level in more than three years on worries
that financing deals that have locked up vast quantities of
metal in China could unravel.
At the same time the euro is near a 2-1/2 year high
against the dollar, the currency used to price metals.
"For European consumers, they have a double whammy in their
favour. This is the first time copper has been at these lows at
the same time the euro is at its highs," Societe Generale
analyst Robin Bhar said.
"Some of the car manufacturers are buying, because it is so
attractive in euro terms."
Companies that use copper to make electrical wiring,
roofing, plumbing fixtures and industrial machinery have been
using the forwards market to lock in supplies for 2016, 2017 and
even 2018 at prices below 5,000 euros ($6,900) a tonne,
according to Bhar and some consumers.
In euro terms, three-month copper futures were trading at
around 4,645 euros per tonne on Thursday, after hitting their
lowest since early 2010 at around 4,600 euros on Wednesday.
The March 2017 copper contract dropped to 4,800 euros on
Thursday, compared with around 5,338 euros in early January.
"It's just too attractive to pass up," one European trader
at a large manufacturing company said.
Business is looking even better after data on Wednesday
showed euro zone industrial output had risen faster than
expected year on an annual basis in January, pointing to
continued economic recovery. Exports have risen and investment
Strong car sales figures from Germany, Italy and Spain have
added to the growing optimism. Sales in Germany, Europe's
biggest autos market, climbed 4 percent.
"We are advising our clients to take this opportunity ... to
hedge for the medium and long term," Gianclaudio Torlizzi, a
partner at Italian metals consultancy T-Commodity, said.
"Maybe this will be the last such opportunity in two years.
Maybe never again."
Benchmark three-month copper contracts have been
falling steadily since January.
The drop accelerated late last week following China's first
domestic bond default, which raised concerns that financiers who
had bought copper and deposited it as collateral for loans could
be forced to pull out of their deals and dump the copper on the
Such of that copper is being sold already. "We are seeing
liquidation of positions by Chinese players, who are in a panic
selling mode," Torlizzi said.
The LME contract slid to a session low of $6,376.25 a tonne
on Wednesday, its weakest since July 2010. It was trading at
around $6,440 a tonne on Thursday, down nearly 9 percent from a
The most-traded June copper contract on the Shanghai Futures
Exchange <SCFcv1 fell by 5 percent on Wednesday to 43,660 yuan
($7,100) a tonne, its lowest since July 2009, before recovering
to around 45,000 yuan on Thursday.
Torlizzi is advising his clients to move quickly, saying the
fundamentals do not justify the current lows.
"We are quite close to the bottom, between $6,200-$6,350.
Going lower would mean the Chinese economy is in a hard landing
scenario, which my data is not confirming at all," he said.
Commerzbank described the fall as "excessive" in a research
note. "There is no fundamental justification for its low level.
What is more, the price does not reflect the current
supply-demand situation on the global copper market. It is very
Analysts polled by Reuters in January expected surplus
stocks of copper to tighten significantly this year and next as
new mine output fails to translate into refined metal.
"The fact that prices are now almost 10 percent lower may
actually stimulate some demand, whereas higher prices would have
maybe kept some of that demand away from the market," Bhar said.
"Fundamentally the market has come around to a much fairer
The metals industry in Europe is traditionally
conservative, and some firms are unable to take advantage of the
current situation to hedge prices years ahead. One fabricator
said his firm was "happy to sit back and watch for now ... We
will get excited if more orders come in".
(editing by Jane Baird)