Commodities Up

By Glenn Dyer | More Articles by Glenn Dyer

Copper rose to a two-month high in New York on renewed speculation that demand will climb in China, the world's largest consumer of the metal.

Last week's news that China's economy grew by 11.9 per cent in the second quarter, the fastest pace in 12 years, is being seen as positive for all metals, but especially copper.

Friday's rise in official Chinese interest rates and cuts on savings taxes will not have a big impact immediately on economic activity, inflation, or demand for metals.

Imports of copper products and concentrates ran at record levels in the first six months of this year and have helped world prices rise 27 per cent so far.

China's surging demand has also helped stabilise the recent sharp fall in nickel prices and helped send lead and tin prices to record highs by exacerbating tight supply/demand situations in both metals.

Comex copper futures for September delivery rose 4.35 US cents to $US3.7055/lb on Friday after earlier touching $US3.725/lb, the highest since May 9.

In London, the LME cash settlement price on Friday hit $US8,120 a tonne. The three-month delivery price rose $US140 to $US8,110 a tonne. The metal rose to a record $US8,800 a tonne in May of 2006.

According to the International Copper Study Group, demand for the metal outstripped production by 265,000 tonnes in the four months through April as Chinese consumption jumped 38 per cent, which if you think about it is an incredible figure.

LME stocks fell 1,350 tonnes on Friday or 1.4 per cent, to 98,675 tonnes. Stockpiles have fallen 46 per cent this year after rising sharply in the second half of 2006 as Chinese consumers of metal and concentrates cut imports.

Also boosting copper prices is union unrest in Chile where contract workers at Chile's state-owned Codelco have been on strike since June 25, cutting production. The company says it will be able to resume operations at its El Salvador mine after the end of a four day stoppage last week.

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Lead on Friday rose to a fresh all-time high of $US3,485 a tonne on the LME, up 110 per cent since January.

The metal rose of 15.2 per cent last week to close at $US3,429 a tonne.

Traders said hedge funds and other speculative money were pushing the lead market higher, helped by the continued cut in three per cent of world output from the Magellan mine in Western Australia and an explosion and fire at a US smelter on Friday.

Demand is booming in Asia because of the surging demand for car batteries in China and India.

Tin surged on Thursday to an all-time high of $US15,700 a tonne and gained 8.5 per cent on the week to close at $US15,400 a tonne. Supply problems in Indonesia, the world's largest tin exporter, are driving the price higher and making traders nervous.

A resumption of supplies, or a steadying of the supply situation could knock the price lower.

Aluminium rose 2.2 per cent on the week to settle at $US 2,854 a tonne, the highest price since late May.

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Meanwhile, gold rose to a two-month high in New York and silver gained after the US dollar fell as the concern about subprime mortgage losses continued to impact market sentiment.

Comex gold for August delivery rose $US6.60 to $US684.70 an ounce after earlier reaching $US687.60, the highest level since May 9.

The metal rose 2.6 per cent last week, the third straight weekly gain and the most since early February: a sign of the growing worry about the subprime mortgage crisis.

September Silver for September delivery rose 2.8 UScents to $US13.403 an ounce. The metal rose 2.2 per cent last week and is up 3.6 per cent this year.

In London gold touched a 10-week high above $US684 an ounce as the dollar fell back. Silver hit a six-week peak and platinum touched its best level for two months.

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On energy markets, oil ended the week little changed. In London, September Brent was down 17 cents on the week to $US77.40 a barrel after reaching an 11-month high of $US78.40 a barrel on Monday.

Nymex August West Texas Intermediate closed up $US1.55 on the week at $US75.57 a barrel.

Sugar ended at 10.30 USc a pound after trading a touch higher. Chicago wheat ended at $US6.1625/bushell, down 3.75USc.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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