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P Sreevalsan Menon
Copper is expected to remain weak over the next fortnight and may even dip below $1,580-90 per tonne on the London Metal Exchange, say analysts.
"The metal is showing signs of bearishness for the week ahead and may pierce the $1,600 per tonne level on the LME. Domestic prices are also showing somewhat a similar trend as producers have huge inventories. But I expect the local market to be steady next week," says Sharad Parihk, president of the Bombay Metal Exchange.
While the red metal has remained depressed on piling stocks in the international markets, it laid low in India due to the poor performance of the manufacturing sector. The consumption of copper has hit a nadir and the main copper producers in the country are going to great lengths to get rid of their inventories.
Copper major Hindustan Copper Ltd was expected to keep its selling prices unchanged for the second half of September but in October, weak demand forced a change. Still, the cost of imports works out to be higher.
HCL is reported tobe offering a discount of Rs 3 per kg on all copper items to rid of the massive inventory.
Late last week some fresh buying by the industry pushed domestic copper price to Rs 9,950 per quintal, a gain of Rs 50. Wire bars, utensils and brass are also showing some recovery of late.
On the LME, copper saw strong-to-normal gains over the last two months aided by either strong equity markets or production cuts by major producers. The metal popped up prior to the US Fed's interest rate cut by a quarter per cent as major funds went on a buying spree to boost their short positions.
"LME is estimated to have a stock of 3,85,000 tonnes and more are shipped in. Absence of China, the big buyer in all seasons, is a big blow to the international markets. Moreover, Japanese are selling in small quantities, which was totally unexpected," Sharad Parikh said.
In late September, major producers began production cuts, the first being South Korea's LG Metals Corp. Spanish producer Minas Rio Tinto followed suit and slashedoutput to provide the much needed support to the copper market.
Even a two-day strike at Finland's Harjavalta smelter also provided support to the copper market, according to analysts. LG metals, which has a 420,000-tonne refining and 350,000-tonne smelting annual capacity, cut the production by 15 per cent for the forth quarter. Copper showed resistance at $1,680 a tonne in September which was soon tested. The analysts subsequently felt that the support might be strong at $1,630 a tonne. The metal soon shattered all support levels and dipped to $1,615 a tonne within the next few days as business became thin on stocks piling up by another 2725 tonnes.
"Everywhere you look it's pretty dire stuff which is not doing us any good," that's how a dealer described the scene to the Reuters newswire. Global economic gloom aggravated as global equity market registered big losses.
Copper slipped even though the falling dollar failed to provide the succour.Analysts finally pegged the support at $1,600. "I don'tthink it will hold much longer as there is nothing to drive a rally," Parikh added. Late last week copper was seen slightly steadier as countries from the Far East have stepped buying and helped the red metal to prop up.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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