Chi­nese De­mand opens “Ar­bi­trage Win­dow” for Cop­per push­ing price to 1-month high

Zambian Business Times - - FINANCIAL MARKETS -

Cop­per prices ral­lied to 1 – month highs on the Lon­don Me­tal Ex­change – LME as the com­mod­ity mar­kets priced-in op­ti­mism over Chi­nese eco­nomic out­look. Solid de­mand in China opened the "ar­bi­trage win­dow" for cop­per im­ports, most traders said. Pre­mi­ums for cop­per held in China's bonded zones have climbed by $9 this week to $74, the high­est in more than two months.

"There is a lot of mo­men­tum in­vestor in­ter­est (in cop­per)," Cap­i­tal Eco­nom­ics an­a­lyst Caro­line Bain said. "And (there is) some op­ti­mism about de­mand ... chiefly in China."

Many me­tals mar­ket par­tic­i­pants are await­ing the out­come of China's Com­mu­nist Party Con­gress next week, she said, for an in­di­ca­tion of broader pol­icy ini­tia­tives and their im­pli­ca­tions for me­tals de­mand.

World top cop­per pro­ducer Chile ex­pects a moder­ate in­crease in the an­nual av­er­age price of the me­tal through the re­main­der of 2017, Min­ing Min­is­ter Aurora Wil­liams said on Wed­nes­day.

The price of cop­per has risen dra­mat­i­cally in re­cent months on strong de­mand from China, the top con­sumer of the me­tal. The sharp in­crease bodes well for the South Amer­i­can na­tion, where de­pend­ing on prices cop­per-re­lated ac­tiv­ity can ac­count for up to 15% of gross do­mes­tic prod­uct.

"The (spot) prices that we're see­ing today are not nec­es­sar­ily sus­tain­able in the medium term," Wil­liams said.

Chile’s cop­per ex­ports reached USD3.18-bil­lion in Septem­ber, their high­est level in nearly three years, ac­cord­ing to Chile's Cen­tral Bank. Lon­don Me­tal Ex­change cop­per was up 1.4% at USD6, 893.50 a met­ric ton. Cop­per had spiked to a 3yr high of USD6, 970 per met­ric ton hit on Sept. 5.

Stocks of cop­per in LME ware­houses fell by another 1,025 tonnes, ex­change data showed last week on Thurs­day. They are now down 9% per­cent from mid-Septem­ber's two-month peak.

Other driv­ers of cop­per price strength are a weak 2 week low dol­lar as U.S. cen­tral bankers showed they were tak­ing a more guarded view of in­fla­tion. Fed­eral Re­serve pol­i­cy­mak­ers had a pro­longed de­bate about the prospects of a pickup in in­fla­tion and slow­ing the path of fu­ture in­ter­est rate rises if it did not, ac­cord­ing to the min­utes of the U.S. cen­tral bank's last pol­icy meet­ing.

Cop­per Cath­odes in tran­sit

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