Metal prices hammer record highs

November 13, 2010 | 09:32
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Copper and tin prices nailed historic highs this week, and gold smashed above $1,400 for the first time in history in a sustained record-breaking run fuelled by hopes of economic recovery.

Crude oil meanwhile rocketed to two-year peaks while soft or agricultural commodities also enjoyed an impressive performance.

"The uptrend in commodity prices continued for much of this week, with prices moving to an elevated trading range," said analyst Sudakshina Unnikrishnan at Barclays Capital in London.

"This week has seen crude oil prices at two-year highs, copper and tin at all-time highs and agricultural markets hitting multi-year and decade highs.

"While the broader economic environment has turned more supportive and sentiment more positive, by the end of the week, concerns of further (interest) rate hikes in China have weighed on prices."

Many raw materials have also won strong support in recent days from the weak dollar, following the US Federal Reserve's decision last week to launch a second wave of asset-buying or quantitative easing, known as QE2.

A weak greenback makes it cheaper for investors holding other currencies to buy dollar-denominated commodities such as copper.

However, the dollar clawed back ground on Friday as investors showed alarm about indebted eurozone countries despite ressurances from top EU leaders at the G20 meeting in Seoul, South Korea.

BASE METALS: Copper soared to a record peak of $8,966 a tonne -- beating the previous high of $8,940 seen in July 2008 -- on supportive Chinese economic data, tight global supplies and strikes in key producer Chile.

In addition, tin set an all-time high at $27,500 per tonne, before both industrial metals ran into profit-taking.

"Prices are being supported by firm Asian markets and robust economic data from China (industrial production, fixed assets investments) which were largely in line with expectations and indicate continued high activity in China," said Commerzbank analyst Carsten Fritsch.

Copper, which is used in plumbing, heating, electrical and telecommunications wiring, has rocketed by 50 per cent since June.

"A strike at the Collahuasi mine (in Chile) has highlighted the fragility of the supply-side and has stoked concerns of a looming market deficit at a time of falling inventories," said analyst Robin Bhar at Credit Agricole CIB.

Collahuasi, in northern Chile, is the third biggest copper mine in the world and produces an estimated three percent of global supplies.

Investors also flocked to copper as they sought to safeguard their cash amid news of a sharp spike in Chinese inflation.

"The market had already been on a charge with the raft of bullish developments, such as QE2, but in the last couple of days, China has been the driving factor," said head dealer Rajesh Patel at trading firm Spread Co.

"Chinese CPI data jumped to two-year highs this week, sending copper prices higher and sparked a short-covering rally which added fuel to the fire."

By late Friday on the London Metal Exchange, copper for delivery in three months eased to $8,695 a tonne from $8,730 a week earlier.

Three-month aluminium slipped to $2,445 a tonne from $2,466.

Three-month lead rose to $2,545 a tonne from $2,525.

Three-month tin pulled back to $26,450 a tonne from $26,600 from a week earlier.

Three-month zinc fell to $2,447 a tonne from $2,529.

Three-month nickel slid to $23,341 a tonne from $24,690.

PRECIOUS METALS: Gold metal soared to a fresh record of $1,424.60 per ounce on the London Bullion Market, after hurtling past the 1,400 barrier, boosted by its safe-haven status and the weak dollar.

In the wake of gold, sister metal silver flew to a new 30-year peak at $29.36 an ounce and palladium chalked up a nine-year high.

"Renewed worries over sovereign debt in peripheral eurozone economies, Chinese inflationary concerns and continued buying from Asian banks have conspired to push gold prices to fresh record highs and silver prices to new 30-year highs this week," said Deutsche Bank analyst Xiao Fu.

Gold is viewed as a traditional safe-haven asset in times of economic uncertainty, and as a safe store of value amid rising inflation.

By late Friday on the London Bullion Market, gold surged to $1,388.50 an ounce at the late fixing, from $1,346.77 a week earlier.

Silver advanced to $26.79 an ounce from $23.96.

On the London Platinum and Palladium Market, platinum rallied to $1,712 an ounce from $1,700.

Palladium increased to $703 an ounce from $640.

OIL: Crude oil prices neared $90 for the first time in more than two years, stoked by expectations of increased demand amid tight supplies.

But they pulled back on Friday when traders took their cue from a stronger dollar and speculation over a Chinese interest rate rise which could curb consumption.

"It seems that oil market is overbought, as crude oil prices have been on an upside momentum ... since September 30, mainly driven by the currency movements," said analyst Myrto Sokou at the Sucden brokerage in London.

The Organization of Petroleum Exporting Countries (OPEC) revised upward its world oil demand growth estimates for this year and next amid cautious optimism about the global economic outlook.

OPEC, which pumps 40 per cent of world oil, said it was pencilling in world oil demand growth of 1.6 per cent to 85.78 million barrels per day (bpd) for the whole of 2010, compared with 1.3 per cent previously.

Demand was forecast to increase by a further 1.4 per cent to 86.95 million bpd next year.

"Despite initial economic assessments that underestimated the second half of the year's economic activities, oil demand is picking up in the third and fourth quarters," OPEC said in its latest monthly report.

Oil demand and price are meanwhile set to grow strongly over the next 25 years despite environmental policies, essentially dooming climate-change goals, the International Energy Agency forecast.

Slightly more than a third of the new demand would come from China's appetite for energy.

"The age of cheap oil is over, though policy actions could bring lower international prices than would be otherwise the case," said IEA chief economist Fatih Birol at a London news conference.

It separately noted that easy-money moves by the United States are pumping up the oil price to around $90 and risk causing asset bubbles.

Strong demand in recent months plus the US economic stimulus moves "have stoked expectations of inexorably higher prices even though the framework of market fundamentals for next year, to us, still looks fairly comfortable," the International Energy Agency said.

By late Friday on London's Intercontinental Exchange, Brent North Sea crude for delivery in December edged down to $87.86 a barrel from $88.10 a week earlier.

On the New York Mercantile Exchange, Texas light sweet crude for December stood at $86.62 a barrel, from 86.77.

SUGAR: Sugar futures soared to major multi-year highs before running into profit-taking.

Unrefined sugar for delivery in March jumped to 33.39 US cents a pound -- the best level for around three decades. And in London, a tonne of white sugar reached a 23 year peak of 811 pounds a tonne.

Sugar, which has shot up by 140 per cent since May, is used mainly in the food and drinks sector but is also used for the production of ethanol -- a cheaper version of gasoline, or motor fuel.

By Friday on the New York Board of Trade (NYBOT), the price of unrefined sugar for delivery in March fell to 28 US cents a pound from 31.81 cents a week earlier.

On LIFFE -- London's futures exchange -- the price of a tonne of white sugar for December retreated to 735 pounds from 776 pounds.

COFFEE: Coffee prices enjoyed fresh multi-year peaks, but traders warned of a possible correction in the market.

"As the price rally is not based on any actual tightening of supply, there is now a risk of a price correction should investors reduce positions," Commerzbank analysts said in a note.

By Friday on NYBOT, Arabica for delivery in December stood at 204.15 cents a pound compared with 204.20 cents the previous week.

On LIFFE, Robusta for January dipped to $1,895 a tonne from $1,981.

COCOA: Cocoa futures diverged ahead of this month's presidential run-off in key producing nation Ivory Coast.

"Quite unusually, there has not been a strong reaction in cocoa prices in the run-up to the election in the Ivory Coast with the market taking a rather sanguine view of the election," added analyst Unnikrishnan at Barclays Capital.

By Friday On NYBOT, cocoa for delivery in December eased to $2,790 a tonne from $2,801 a week earlier.

On LIFFE, cocoa for December strengthened to 1,811 pounds a tonne from 1,795 pounds.

GRAINS AND SOYA: Soya and maize prices hit new two-year highs.

By Friday on the Chicago Board of Trade, January-dated soyabean meal -- used in animal feed -- rallied to $13.01 a bushel from $12.84.

Maize for delivery in December eased to $5.49 a bushel from $5.87 the previous week.

Wheat for December stood at $6.91, from $7.28 last time around.

RUBBER: Malaysian rubber prices climbed this week amid concerns of tight supplies following heavy rain and floods in Thailand and northern states in Malaysia.

The Malaysian Rubber Board's benchmark SMR20 climbed to 438.30 US cents per kilo, from 388.05 cents last week.


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