UPDATE 3-LME copper rises, Shanghai metals limit down
* LME copper up after Aussie rate cut, outlook still dim * Shanghai metals limit down for second day, record weak zinc
* ShFE copper weakest in 2-½ yrs, aluminium at 5-½ yr low (Updates prices to Shanghai close)
By Nick Trevethan
SINGAPORE, Oct 7 (Reuters) – London copper rose 1.3 percent on Tuesday after Australia’s central bank cut interest rates by 1 percentage point, twice the size analysts had expected, but the ongoing financial crisis means the rally is likely to fizzle.
Australia’s central bank made the biggest cut in its benchmark cash rate in 16 years, raising hopes that policymakers around the world would act to east the crisis. [ID:nSYD359267]
“This doesn’t change the picture for commodities in the longer term, but could create a little relief rally in these oversold markets,” said ANZ senior commodities analyst Mark Pervan.
“What it does do is create the possibility in investors’ minds that we might see a larger-than-expected cut by other central banks.”
But he remained bearish on base metals, shaving his target price for copper to $4,850 a tonne by the second quarter of next year, He expected price to average just under $5,100 next year and $5,400 in 2010.
London Metal Exchange copper rose $70 to $5,630 at 0707 GMT, having lost 7.5 percent on Monday when it hit its lowest since February 2007. Last week, copper lost 15 percent, the market’s biggest-ever, seven-day fall.
“There was a huge change in financial markets while China was out on holiday. I think the macro-economy will suffer for the next three to five years and base metals are likely to be soft in the longer term,” an analyst in Shanghai said.
“The first target is $5,200 then $4,500. With my positive hat on, I think $4,500 might hold, but thinking more negatively, we could break down below $4,000.”
The December Shanghai copper contract fell 5 percent to 2,570 yuan from Monday’s settlement, to 48,640 yuan ($7,109) a tonne, the weakest for the benchmark since March 2006, as prices chased losses in London during last week’s week-long holiday.
Aluminium also shed 5 percent at the start of trade to 14,155 yuan, its weakest since April 2003. By the close, it had managed to claw off that low, to trade at 14,470 yuan, down 435 yuan or 2.9 percent.
LME aluminium rose $10 to $2,265 a tonne. Prices are down 5.7 percent this year, making the lightweight metal the second-best performer on the LME, after tin, which is unchanged.
Nickel was the weakest performer, down almost 50 percent this year, followed by lead and zinc.
Shanghai zinc fell by its 6 percent limit to a record low of 12,845 yuan.
Dealers said Shanghai metals could touch their downside limits for a third day running on Wednesday, in particular copper, if London prices fell later on Tuesday.
“Everything in my order book says sell, but bear in mind that currencies other than the dollar have taken a real thumping and looking at zinc in Aussie dollars for example, the price hasn’t changed that much,” a dealer in Sydney said.
That could reduce pressure on miners in places like Australia and other countries to trim output, as weaker domestic currencies have helped offset declining prices, staving off closures and keeping markets well-supplied with metal, adding more weight to prices.
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