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Comex copper ends slide, rises on shortcovering

NEW YORK: Comex copper futures rebounded Tuesday to close modestly firmer after steady fund selling abated and speculative buying came to give prices a boost, dealers said.

"The funds stopped selling and that left a lot of people with new short positions," one dealer said. "You saw some short covering and some bargain-hunting," he added.

Active May ended up 0.40 cent at 79.80 cents a lb after trading 78.10-80.35 cents, with spot March up 0.60 at 78.70 cents, traded 76.90-78.80 cents. The rest rose 0.40 to 0.45 cent.

Final volume was estimated at 22,000 contracts, compared to a new daily record on Monday of 35,444 contracts.

"There was some bearish news out Friday," said Refco analyst Dan Horn, referring to the LME's sharp rise in copper stocks. "But I think we'll get back up to the 82-cent level in the near-term."

The market fell sharply Monday amid fund liquidation and March rolling over into the May contract. The rollover triggered sell-stops sending prices sinking below support levels under 80 cents.

Tuesday's first notice day in March copper brought more switching, but fund selling was wiped out as speculative and local buying swooped in under the market.

Horn expects "a lot of scrap metal to start flooding the market" at the 85-cent mark. "We bet that is a pretty good fundamental resistance point," he said.

Dealers peg near-term support in May copper at 78 and 77.80 cents, with resistance around 83 cents.

Open interest was little changed from the previous day, noted a dealer who said that it was unusual that "for every position that was liquidated, there was a new one put on."

As of Tuesday, Comex copper had 72,418 contracts outstanding with 34,890 in May. Spot March open interest totalled 10,905 contracts.

"We plunged through not only $1,800 (a tonne on the London Metal Exchange), but the 100-day moving average and a major trendline...both right on top of $1,800," said one New York broker.

LME three-months copper closed lower amid steady fund selling when light trade support below the market lacked sufficient volume to lift prices.

LME copper fell $12 to stand at $1,733 a tonne, the lowest close since Dec 1, but above its intra-day nadir of $1,718.

LME copper stocks on Tuesday rose 3,500 tonnes to total 819,950 tonnes, and Comex stocks gained 47 short tons to 95,511 tons on Monday.

In separate news, power blackouts in northern Chile last weekend caused unrecoverable losses to the region's major copper miners of $18.5 million, with 22 million lbs in lost copper output, Chile's Mining Council said Tuesday.

Representatives from state miner Codelco and five privately-owned mines said that their indirect losses would eventually be much higher because of equipment damage and poorer-quality cathode output.

In other news, Chile's National Statistics Institute said Tuesday that copper output there rose 1.9 percent in January compared to the same month in 1999 to reach 380,097 tonnes. Chile is the world's leading copper-producing nation. Comex is a division of the New York Mercantile Exchange. -Reuters