September 22, 2009 / 9:33 AM / 10 years ago

METALS-Copper up on weak dollar, but inventories weigh

 * Dollar weakness propels copper as much as 3 percent
 * Worries over high copper inventories limit gains
 * Fourth-quarter outlook for metals promising
  (Recasts, updates prices to close of U.S. session; adds NEW
YORK to dateline, new byline)
 By Barani Krishnan and Michael Taylor
 NEW YORK/LONDON, Sept 22 (Reuters) - The dollar's return to
one-year lows saw copper futures rallying as much as 3 percent
on Tuesday, before worries over high inventories of the base
metal led the market to settle off the session's highs.
 Copper for December delivery HGZ9 ended up 2 percent, or
5.90 cents, at $2.8645 a lb on the New York Mercantile
Exchange's COMEX division. The intraday peak was $2.8920, up 3
percent from Monday's close.
 Copper for three month delivery MCU3 on the London Metal
Exchange ended at $6,270 a tonne from $6,190 at the close on
Monday. In the previous session, the metal, used in power and
construction, hit a 2-1/2 week low at $6,050.
 "It's all dollar-related trades at this point, on the view
that the economy is revving itself back and investor appetite
is returning," said Frank McGhee, trader with Integrated
Brokerage Services LLC in Chicago.
 The dollar slid to a one-year low of just over $1.48
against the euro as crumbling sentiment on the U.S. currency
prompted selling ahead of a Federal Reserve meeting and Group
of 20 summit this week. [USD/]
 Aside from naturally creating inflationary pressure in
dollar-denominated commodities, a weak dollar also makes raw
materials such as copper more attractive to users of other
currencies such as the euro.
 But some analysts said prices of copper, which have doubled
since the end of 2008, appear to be rising with scant regard
for demand, as evidenced by creeping inventories of the metal
on the LME.
 "The dollar seems to be pushing all commodity markets," VTB
Capital analyst Andrey Kryuchenkov said. "Everybody expects a
good fourth quarter (but) we're not out of the woods yet ...
There is no demand in the short term. Nobody is actually
buying."
 Latest customs data from China showed August imports of
refined copper fell by a quarter from July, as expected. For a
graphic showing China's copper imports, click:
here
 "The Chinese won't be buying at these prices. They need to
use up whatever stocks they have. For copper to break $6,500,
we'll need to see fundamental demand. I don't think you can
break that on sentiment and the dollar," said Kryuchenkov.
 Latest data showed on copper stocks in LME warehouses
having fallen 50 tonnes to 331,775 tonnes, although they
remained near levels not seen since late May. Stocks have now
gained about 30 percent since the middle of July. <LME/STX1>
 For a graphic of seasonal trends in copper stocks, click:
here
 Copper inventories in warehouses monitored by the Shanghai
futures exchange (SHFE) rose 7 percent to 104,248 tonnes from
the previous week, data showed on Friday. [ID:nBJD003058]
 PROMISING OUTLOOK FOR Q4
 But other analysts feel the weak dollar alone will be able
to drive commodities higher, until economic growth catches up.
 They also cite improving macroeconomic data that signaled
the recession was coming to an end. For example, U.S.
single-family home prices rose 0.3 percent in July from June.
[ID:nN22339690]
 "When we start coming into the fourth quarter, providing we
continue to see positive data releases, then I see every reason
for prices to be supportive," said David Wilson, director of
metals research at Societe Generale.
 In other metals, aluminium MAL3 ended at $1,889 a tonne
against $1,884. LME stocks of the metal, used in transport and
packaging, fell 4,825 tonnes but remained near record levels
above 4.6 million tonnes.
  Steel-making ingredient nickel MNI3 closed at $17,750
from $17,400 while battery material lead MPB3 ended at $2,289
from $2,215.
 Zinc MZN3 ended at $1,946 a tonne from $1,919 and tin
MSN3 was last bid at $14,650 from $14,450.
 Metal Prices at 1612 GMT:
Metal     Last      Change  Pct Move   End 2008   Ytd Pct move
COMEX Cu  284.05      4.80     +1.72     139.50    103.62
LME Alum  1885.00     1.00     +0.05    1535.00     22.80
LME Cu    6265.00    75.00     +1.21    3060.00    104.74
LME Lead  2300.00    85.00     +3.84     999.00    130.23
LME Nickel 17875.00  75.00     +2.73   11700.00     52.78
LME Tin   14625.00 -175.00     -1.18   10700.00     36.68
LME Zinc   1930.00   18.00     +0.94    1208.00     59.77
SHFE Alu  14925.00  -50.00     -0.33   11540.00     29.33
SHFE Cu*  48650.00 -130.00     -0.27   23840.00    104.07
SHFE Zin  15280.00  -75.00     -0.49   10120.00     50.99
 ** 1st contract month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07
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