Copper seen touching $5000

Copper prices on the London Metal Exchange (LME) may touch $5,000 in the near future but may not sustain at this level, as the surge is driven by a handful of traders with vested interests, feel industry players.

In the domestic market, the metal set a new record today with wire bar touching its all-time high of Rs 25,500 a quintal - a gain of Rs 2,600 since October 1.

The domestic market prices are moving in tendem with that of the international market where the red metal is setting a fresh benchmark at almost every closing hour.

The prices broke the psychological barrier of $4,650 in recent mid-day trades on strong fundamentals and absence of any large stock rises. But traders feel the metal is due for a correction, especially if Chinese copper shipments show up in the LME-registered warehouses.

V K Sinha, deputy manager - commercial, Hindustan Copper, said, "Copper is being pulled by a handful of players with vested interests. But nobody knows when they will drop it down."

The demand for copper has been on an upswing due to regular and rapid innovation of consumer electronics, but the production is squeezing on price uncertainty. So, analysts believe the prevailing high prices will not sustain for long. Producers too are sceptical about the sustainability of prices and are therefore not keen on capacity expansion.

This month, the price may touch another milestone because of possible trade rush, to book the metal on the eve of Christmas and Boxing Day. The second last week of the month will be crucial for copper traders when the metal prices may crash even to $4,650, but it would not go below $4000, said Sinha.

"Anything between $4500-5000 is unrealistic and not sustainable. If it is not falling now, the fall is imminent in January/February. But the average price may not decline below $4,000," said Sinha.

China's Jiangxi Copper Co's plan to boost copper cathode production capacity by 75 per cent by 2007-end to help ease shortages in domestic copper supply may be bad news for bulls, but it will not hit the overall sentiment of copper across the world.

"Instead of releasing 200,000 tonne of copper as assured, China released just 13,000 tonne," a leading trader Surendra Mardia said.

At present, domestic market traders are applying caution, and buying is restricted keeping in view the fact that delivery takes at least two months from the date of booking. Traders fear of a price crash, and are refraining from fresh booking as long as possible, Mardia added.