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Comex copper rebounds on economic optimism

NEW YORK: Comex copper snapped back from last week's corrective action, ending near session highs and eyeing recent records in response to rebounding stock prices and a strong economic environment, analysts said.

Dealers said a decline in Londom Metal Exchange copper warehouse stocks on Monday also supported prices, though inventories remain near the records set last week, which contributed to the profit-taking selloff.

Comex March copper rose 1.45 cents to settle at 84.95 cents a lb, just under the top of its 85-83.25 cent range. Spot February rose 1.40 cents to 84.40 cents a lb.

"With equities back up today and (warehouse) stocks declining, I think the bias was to the upside and you probably saw some short covering to support that," said David Rinehimer, head of commodities research at Salomon Smith Barney.

The Dow Jones industrial average ended up almost 202 points near 10,941, shaking off Friday's steep losses on the back of alarmingly robust economic growth data and coincident indications of upward wage and price pressures.

Dealers said the market has priced in an interest rate increase out of the two-day meeting of Federal Reserve policy makers starting Tuesday.

Copper derived some buoyancy from a 2,175-tonne fall in LME warehouse stocks on Monday. But at 813,075 tonnes, stocks remain near record highs.

Comex copper stocks were up 96 short tons at 95,587 tons late Monday. LME stocks had been increasing steadily last week, starting with a 17,350-tonne bulge on Monday, with most traders attributing the rise to an accounting transaction, where off-warrant material was placed on warrant.

Dealers said the focus was back on the March copper high at 88.50, scored on Jan 20. But even if 88.50 is surpassed, headway over 90 cents might be difficult without new news or fears about a deeper supply/demand deficit, analysts said.

"For the market to go significantly above the 90 level, I think the growth estimates have to continue to be revised upward, for the global economy anyway," Rinehimer said.

In supply news, Canadian base metals miner Falconbridge Ltd. said on Monday it plans to restart its Kidd Creek copper smelter by the end of the week.

The reopening comes after the Toronto-based company was forced to shut down the facility near Timmins in northern Ontario on December 20, following a run-out of copper blister and slag from the furnace wall.

U.S.-based Phelps Dodge Corp., the world's second largest copper miner, expects its Candelaria mine in Chile to produce 193,300 tonnes of copper this year against last year's record 226,800 tonnes, a company official said Monday.

Supports in recent days emerged between 83.10 cents and 83.35.

It's a little bit of a short-term triple bottom," said Scott Meyers, senior analyst at Pioneer Futures. "I'd like to see it settle above 85 cents. I think that could happen tomorrow."

"We get the Fed report on Wed. Interest rates could play out interestingly in this market," he said. "Coming into the spring season, copper use with building -- let's see how that plays out."

Estimated final volume for copper on Monday was 12,000 contracts, compared to Friday's final volume of 14,099 contracts.

The nine-day relative strength index for March copper rose to a nearly-neutral 49 on Friday, from an oversold 24 on Friday Thursday.

Technical analysts usually interpret an RSI reading of 70 or higher as indicating overbought conditions and 30 or below as oversold.-Reuters