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Comex March copper ends down, breaks key support

NEW YORK: Comex copper futures on Friday ended sharply lower, with March piercing key support as March-May rollovers accelerated and LME stocks hit a record high, sources said.

"We're going to go out on a weak note here," said AG Edwards commodity commentator James Quinn. "That big increase in warehouse stocks really set the tone."

Active March sank 1.90 cents to 81.50 cents a lb, trading 81.45 to 83.40, breaking below the key psychological support level of 82.00 cents.

Spot February lost 1.85 cents to 81.40 cents a lb, May was off 1.90 cents at 82.75, and back months were stripped by 1.90 to 2.00 cents.

Copper inventories on the London Metal Exchange ballooned to a record high of 814,800 tonnes Friday, up 24,850 tonnes, on an inflow into New Orleans and Hamburg warehouses.

Although Comex stocks rose just 48 short tons to total 95,417 tons, Comex and LME stocks combined set a record for total inventories at 993,580 short tons, according to industry consultants J.E. Gross & Associates.

William O'Neill, commodities analyst at Merrill Lynch said that Friday's increase in LME stocks was not necessarily a reflection of poor demand for copper.

"I think they are probably being done for some sort of technical financing reasons as opposed to indicating any kind of supply glut."

Floor sources said that Friday's market reflected funds and trade firms rolling longs into the May contract ahead of March delivery period which begins next week.

"Most of it is fund (selling), and you have an absence here of any real trade buying," Quinn said.

For most of the week, Comex copper took its cue from the action on the floor of the LME, traders said.

"We're following London, down-ticking," said a Comex floor trader on Friday. "Most of the switches are getting done today and probably Monday and Tuesday as well. Volume is pretty heavy."

LME three-months copper skidded to a close at $1,826 a tonne, down $40 from the close on Thursday. Copper fell to the bottom of its range after resistance at $1,880 kept the market capped.

The final estimated volume for Comex copper reached 26,000 contracts, against the official tally of 25,903 contracts traded on Thursday.

O'Neill said that the base metals complex was suffering from interest rate jitters and worries that the run up in crude oil could jump-start inflation. "I think that the markets have been struggling a bit anyway, and so news that tends to lean to the bearish side was taken to heart."

On Friday, it was announced that fourth quarter U.S. gross domestic product, the broadest measure of total economic activity, rose a revised 6.9 percent annual rate instead of the 5.8 percent reported a month ago.

O'Neill put near-term support in March copper at around 80 cents and strong resistance at 85.20 cents.

The first notices for March delivery will be on Tuesday.

Comex is a division a the New York Mercantile Exchange.-Reuters