Copper is holding firm at $8000 a tonne, over 2.66 times higher than the actual production cost of $3000 a tonne, aided by the high crude oil prices. With the energy prices estimated to rise further, the cost of the red metal may go up severely.
"Many infrastructure projects may be suspended till the energy prices stabilise. The governmental spendings may come to a standstill, especially in developing countries such as India and China where the demand is high," said Surendra Mardia, president, Bombay Metal Exchange (BME).
Analysts expect crude to hit the benchmark of $150 a barrel in no time as the demand continues to surge. Crude oil has doubled in the last one year, pulling along base metals and other commodities.
"The oil-led rally in base metals will come to an end only when the demand slumps. The demand for oil continues to go up even at this high price, which simply means that consumers have adapted to the price spurt," said Jayant Manglik, head-Commodities, Religare Enterprises.
Navneet Damani, an analyst with the research company Anand Rathi, however, said that lead, aluminium and zinc are trading at lows and may recover with the turnaround in dollar against global major currencies.
On Friday, the US Dollar Index, a gauge of six major currencies including the euro and yen, fell as much as 1 per cent after the Labour Department said the US jobless rate climbed the most in more than two decades last month. The US currency fell to $1.5769 a euro, the lowest since May 26. It touched a record low of $1.6019 on April 22.
The US payrolls fell by 49,000 jobs in May after a decline of 28,000 in April, the Labor Department said on Friday in Washington. The jobless rate increased from 5 per cent to 5.5 per cent, the biggest jump since February 1986.
All industrial metals, barring lead, moved up last weak on huge volatility in crude and dollar. Copper ended up at $8146 a tonne, aluminium at $2922 a tonne, nickel at $22150 a tonne, tin $22215 and zinc at $1950. On the other hand, lead moved down marginally to $1940 a tonne during the week.
Copper has gained 19 per cent this year as the dollar fell to record lows, boosting demand for commodities priced in the currency. Copper futures for July delivery gained 8 cents to $3.623 a pound on Friday on the Comex division of the New York Mercantile Exchange.
That's the biggest jump for a most-active contract since May 16. The price rose 0.5 per cent in the past week, the first weekly rise since May 16, on dollar weakness.
