Copper near $8000 mark on protest at Indonesia mine

Copper prices are steadily inching towards the $8,000 level on speculation that the protest at Freeport-McMoRan Copper & Gold's Grasberg mine in Indonesia, the second largest mine in the world, may disrupt output.

Delayed deliveries from Argentina's Xstrata, the world's fourth-largest copper producer, owing to floods, also kept traders apprehensive over the supply of the metal in the weeks ahead.

Copper on the LME hit a high of $7,980 in the early Monday trade, but the upward momentum was restricted following an inventory addition of 300 tonne.

Although, the way-in stock was minute, traders were sceptical of taking fresh positions, anticipating that the hidden inventory may hit the market. Stocks on Monday were reported at 174,600 tonne, well below the level of 181,075 tonne on April 2.

The prices, meanwhile, have gone up substantially by more than $1,000 a tonne during the same period, which indicates that fund houses and speculators are active in the market.

"Funds are ruling the metals market and, therefore, total allocations for the market will determine the future price movement," said Surendra Mardia, a Mumbai-based trader.

Meanwhile, according to a survey by hedge fund managers based in London, hedge funds more than doubled their market share of assets since 2002 and managed six times more assets last year than they did four years ago.

The survey by International Financial Services hinted that London accounted for 21 per cent of the $1.5 trillion managed by hedge funds worldwide.

"This statistics simply indicate that funds are ruling the world and they can take any direction of their choice, which is evident in metals, added Mardia. The second most important gainer after copper was zinc, which recorded a gain of around $350 in the last fortnight to hit $3,566. The inventory dropped to 104,650 from 106,100 tonne.

Despite the falling nickel inventories, prices of the metal are on the decline. Nickel prices declined to $50,000 a tonne in the London spot market after jumping to $52,375 on April 5 despite a fall in inventories in the LME warehouses to 4,272 tonne.

"The industrial uses of nickel has come down, thereby reducing the demand from stainless steelmakers," said a trader.

Prices of aluminium, too, gained to $2,814 in the early Monday trade because of the falling inventory from 811,200 tonne on April 2 to 804,375 tonne on Monday, a decline of 6,825 tonne.

In the domestic market, copper scrap sales have almost come to standstill over the rising prices. Copper processors, a major scrap generators, believe that copper prices would go up further, resulting in better remuneration in future.

Despite fresh addition of about 2,500 tonne to the existing stock of 36,200 tonne, lead prices are moving up because of a deficit forecast by Macquarie Bank.

According to the bank, lead output is likely to lag demand by 74,000 tonne this year, compared with an earlier estimate of 33,000 tonne.