Copper unlikely to see further upside

Copper seems to have peaked out and further upside is almost unlikely in the current circumstances. So traders need to adopt a cautious approach for any fresh positions in the red metal.

Traders are divided on the direction of copper prices going forward. A section of traders believes the metal will ride on China's voracious appetite for the metal used in wires and pipes.

Others think its price will fall in the wake of an overbought situation. If China, the world's largest consumer of copper, increases imports, the prices will surely hit a new high. Its copper imports have more than doubled in a year to 1,52,651 tonne in February, the highest since May 2005.

In London, spot copper prices rose by a marginal 3.35 per cent last week to $6,852 a tonne on Friday from $6,630 on Monday. This is the third week of growth in a row, extending a rally to the highest since December, on signs of a rebound in demand.

On Comex, the commodity division of New York Mercantile Exchange, copper futures for May delivery changed a little at $3.069 a pound. Earlier, the prices touched $3.133, the highest since December 12. They gained 1.9 per cent last week.

On the London Metal Exchange (LME), copper for delivery in three months rose $15 or 0.2 per cent to $3.05 a pound ($6,735 a tonne). Apparently, the prices have gained 29 per cent in the past year.

According to LME data, stockpiles in its registered warehouses have slid for six straight weeks, the highest slump since July 2005.

According to Jose Pablo Arellano, executive president of Chile's state-owned Codelco, the world's biggest copper producer, demand for the red metal will continue to rise through next year as construction surges in China, which is going in for urbanisation requiring a lot of copper.

Consequently, China's demand for copper was expected to continue in the long run, Jose said. LME inventories dropped 2.2 per cent or 4,125 tonne to 1,83,650 tonne on Friday, thus widening its fall to 5.5 per cent last week.

Copper prices have rallied every year since 2002 amid falling stockpiles and supply disruptions at the end of major producers such as Chile. On Comex, the metal had touched a record $4.04 a pound on May 11.

Additionally, China is back in the market after record-high prices in May last year forced some manufacturers to slow purchases and rely on their stockpiles, halting the rally. Copper has jumped 27 per cent since reaching a 10-month low on February 2.

In the domestic market, prices of copper wire bar slipped to Rs 364 a kg from Thursday's peak at Rs 368. The week had started on a discouraging note at Rs 364 and slipped to Rs 361 a kg on Tuesday.

According to local traders, although copper is currently scarce in the market, players are not very keen on making fresh investments owing to volatility in the metal's prices globally.