Copper firms up

Supply-and-demand fundamentals for copper provide support for the metal

Copper prices at Comex ended higher on Wednesday, 21 September 2011. Supply-and-demand fundamentals for copper continued to strengthen, providing support for the metal. Copper also rose as Federal Reserve policy makers met to consider ways to boost economic growth.

Copper for December delivery ended higher by 4 cents (1%) to $3.76 a pound at Comex on Wednesday. Last week, copper lost 1.8%. Copper ended the month of August lower by 6.3%.



Red metal prices for three-month-delivery at LME rose $61 (0.7%) to $8,487 a metric ton on Wednesday.

The FOMC announced this afternoon that in order to support a stronger economic recovery it intends to purchase $400 billion of Treasuries with maturities of six years to 30 years, while selling an equal amount of Treasuries with remaining maturities of three years or less, by the end of June 2012. Many market pundits had anticipated such a plan, and had already designated it "Operation Twist" to reflect the Fed's focus on selling shorter term Treasuries and buying longer-term issues. To little surprise, the FOMC also reiterated that it expects economic conditions to warrant exceptionally low levels of the federal funds rate at least through mid-2013.

US stocks ended strictly lower following Fed's comments and also in response to news that Bank of America, Wells Fargo and Citigroup all had their debt ratings downgraded by analysts at Moody's. The decision comes after Moody's had put the firms under review a few months ago.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, ended lower by 0.16%.

The International Copper Study Group said on Tuesday that the refined copper market showed a production deficit of 42,000 metric tons in June, and, for the first half of 2011, a production deficit of 130,000 metric tons. That compares to a production deficit of 286,000 metric tons in the same period of 2010. The report also said that copper usage grew “a modest” 1% in the first half compared to the first six months of 2010.

Among other traded metals at LME on Wednesday, lead in London rose 0.3% to $2,327 a ton and nickel rose 0.1% to $21,245 a ton. Aluminum closed 0.3% higher at $2,332 a ton, and zinc closed higher by 1.6% at $2,116 a ton.

At the MCX, copper prices for November delivery ended higher by Rs 6.45 (1.6%) at Rs 405.1/Kg. Prices rose to a high of Rs 405.45/Kg and fell to a low of Rs 399.5/Kg.