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Comex copper ends on further price erosion

NEW YORK: Comex copper futures ended lower on Tuesday on further price erosion, spurred by news out of Chile about rising output and little supply restraint lending the market to be technically weaker.

The active May copper contract ended at 62.20 cents a lb, down 0.25 cent, after trading 61.80 to 62.90 cents, while spot April settled at 61.70 cents, down 0.20 cent. All the back months closed down 0.20 to 0.30 cent.

"We continue to see the erosion of copper prices and you don't need to look any further than Chile. They showed that their mining volume was up almost nine percent in 1998 compared to 1997 at 3.69 million tonnes and this illustrates, again, the lack of supply side response into a lackluster demand market," said William O'Neill, commodity analyst with Merrill Lynch.

"We're expecting Chilean production will probably be up again by four or five percent. They keep pumping the metal out and one reason is they have very low cost of production (estimated at 45 cents a lb)," he addded.

LME warehouse stocks increased 2,600 tonnes to 716,750 tonnes Tuesday. Comex stocks rose 953 short tons to 120,559 tons in Friday's report.

The LME three-month price was still weak, closing down $25 at $1,387 a tonne. In the short-term further downside potential could drag the market to new lows.

"Supply-demand factors continue to weigh on the market," said O'Neill. He also said prices will continue to erode and Merrill Lynch is forecasting a 58 cent price at the bottom of its trading range.

In the meantime, the market will likely continue to work through some consolidation but slip further toward the downside. "The recent rally was motivated by a technical consolidation and some options buying. Now we're back to the reality of the fundamentals," said O'Neill.

According to state-run Chilean Copper Commission copper exports increased 8.6 percent to 3.58 million tonnes in 1998 versus 3.30 million tonnes in 1997.-Reuters