NEW YORK (Dow Jones)--Copper ended 2010 at an all-time record, locking in a near 33% gain on the year amid dollar weakness and thin trading volumes.
The most actively traded copper futures contract, for March delivery, settled up 1.9%, or 8.45 cents, at $4.4470 a pound, a record settlement price. The contract also set an intra-day high of $4.4520.
Thinly traded January copper was up 1.9%, or 8.3 cents, at $4.4395 per pound on the Comex division of the New York Mercantile Exchange.
Copper prices drew strength from a weaker dollar, which eased versus the euro on the final day of the year. This is a continuation of a trend seen for much of the year. Commodities such as copper are dollar-denominated, so it is easier for buyers using foreign currencies to bid up prices when the greenback falls. The euro was recently at $1.3358, compared with $1.3295 late Thursday.
Copper's jump on Friday was exacerbated by low trading volumes. As the number of market participants falls, individual trades tends to have an outsized influence on overall prices.
"Copper's dropped into missle mode here," said Sterling Smith, analyst at Country Hedging. "The lack of people selling into it is exacerbating the rally."
Copper prices are up for a second consecutive year, though this year's gains of 32.9% are overshadowed by 2009's record gains 138.5%.
The industrial metal's record-breaking rally this year began in July as a stronger-than-expected recovery in industrial demand awakened concerns about supplies.
Analysts forecast copper consumption will outpace supply in 2011 as the global economic recovery ramps up. Copper is ubiquitous in construction and manufacturing, and is a key component in heating and cooling systems, electrical wiring and plumbing.
The International Copper Study Group forecasts a copper deficit of 435,000 metric tons in 2011. This would be the first deficit in three years, during which global copper production has averaged around 18 million tons, according to ICSG data.
Prices are expected to receive further support from the emergence of exchange-traded funds backed by physical copper. Such ETFs were created to make it easier for investors to bet on metals that have traditionally been the domain of merchant traders, miners and fabricators. Some fear that if speculative investors start to hoard copper, less will be left for commercial use, thus pushing up prices.
"We have these new ETFs coming in copper and people are front-running that expected buying," said Frank Lesh, broker and futures analyst at FuturePath Trading.
The tight supply and demand balance was underscored this November, when it emerged that one trader amassed a dominant position in London Metal Exchange copper inventories. One party currently holds between 80% and 90% of the 377,550 metric tons of copper stored in LME approved warehouses. The exchange is monitoring the trader closely but so far the position has had little impact on prices.
Declining output from established mines underpin the broader supply worries. Mines in Chile, long the world's top copper producer, are seeing their deposits exhausted. New projects are too small and few in number to make up for the shrinking volumes. In addition, the possibility of supply disruptions is fresh in the minds of market participants.
The Dona Ines de Collahuasi mine was unable to fulfill contractual obligations to ship copper following a fatal accident at its port last week. This comes shortly after the 33-day labor strike at Collahuasi, which accounts for about 3% of annual world supply.
http://online.wsj.com/article/BT-CO-20101231-703918.html
The most actively traded copper futures contract, for March delivery, settled up 1.9%, or 8.45 cents, at $4.4470 a pound, a record settlement price. The contract also set an intra-day high of $4.4520.
Thinly traded January copper was up 1.9%, or 8.3 cents, at $4.4395 per pound on the Comex division of the New York Mercantile Exchange.
Copper prices drew strength from a weaker dollar, which eased versus the euro on the final day of the year. This is a continuation of a trend seen for much of the year. Commodities such as copper are dollar-denominated, so it is easier for buyers using foreign currencies to bid up prices when the greenback falls. The euro was recently at $1.3358, compared with $1.3295 late Thursday.
Copper's jump on Friday was exacerbated by low trading volumes. As the number of market participants falls, individual trades tends to have an outsized influence on overall prices.
"Copper's dropped into missle mode here," said Sterling Smith, analyst at Country Hedging. "The lack of people selling into it is exacerbating the rally."
Copper prices are up for a second consecutive year, though this year's gains of 32.9% are overshadowed by 2009's record gains 138.5%.
The industrial metal's record-breaking rally this year began in July as a stronger-than-expected recovery in industrial demand awakened concerns about supplies.
Analysts forecast copper consumption will outpace supply in 2011 as the global economic recovery ramps up. Copper is ubiquitous in construction and manufacturing, and is a key component in heating and cooling systems, electrical wiring and plumbing.
The International Copper Study Group forecasts a copper deficit of 435,000 metric tons in 2011. This would be the first deficit in three years, during which global copper production has averaged around 18 million tons, according to ICSG data.
Prices are expected to receive further support from the emergence of exchange-traded funds backed by physical copper. Such ETFs were created to make it easier for investors to bet on metals that have traditionally been the domain of merchant traders, miners and fabricators. Some fear that if speculative investors start to hoard copper, less will be left for commercial use, thus pushing up prices.
"We have these new ETFs coming in copper and people are front-running that expected buying," said Frank Lesh, broker and futures analyst at FuturePath Trading.
The tight supply and demand balance was underscored this November, when it emerged that one trader amassed a dominant position in London Metal Exchange copper inventories. One party currently holds between 80% and 90% of the 377,550 metric tons of copper stored in LME approved warehouses. The exchange is monitoring the trader closely but so far the position has had little impact on prices.
Declining output from established mines underpin the broader supply worries. Mines in Chile, long the world's top copper producer, are seeing their deposits exhausted. New projects are too small and few in number to make up for the shrinking volumes. In addition, the possibility of supply disruptions is fresh in the minds of market participants.
The Dona Ines de Collahuasi mine was unable to fulfill contractual obligations to ship copper following a fatal accident at its port last week. This comes shortly after the 33-day labor strike at Collahuasi, which accounts for about 3% of annual world supply.
http://online.wsj.com/article/BT-CO-20101231-703918.html
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