New York — Copper prices extended gains in after-hours business Wednesday as the U.S. dollar slid further against the euro after the U.S. Federal Reserve pledged to hold interest rates near zero per cent for an “extended” period.
“I think a lot of people were maybe looking for the Fed to change that ‘extended' wording, but they are still going to stick with low rates for an extended period of time and I think that will continue to place downward pressure on the dollar and upward pressure on both precious and industrial metals,” said Zachary Oxman, managing director with TrendMax Futures in Encinitas, Calif.
The Fed kept its benchmark federal funds rate unchanged in a range of zero to 0.25 per cent, as expected, and said the economy has “continued to pick up” since its last policy meeting in September.
Copper for December delivery on the New York Mercantile Exchange's Comex division ended up 3.7 cents (U.S.) at $2.9930 a pound. After hours, the metal used in power and construction rose past the $3 level following the Fed decision.
On the London Metal Exchange, benchmark copper closed up $110 at $6,570 a tonne, and extended its gains as well in electronic business to above $6,600.
“No real change in policy or Fed thinking .... It's really steady as she goes well into next year,” said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago. “The dollar is down, as should be, with no real indications at all at when they might tighten policy.”
A weaker U.S. currency makes dollar-priced commodities cheaper for holders of other currencies.
Attention will turn Friday toward monthly U.S. employment data. Forecasts call for the unemployment rate to edge up to 9.9 per cent in October from 9.8 per cent in September; non-farm payrolls are expected to fall by 175,000 in October after a decline of 263,000 in September.
This week, industrial metals have been helped by strong surveys of manufacturing in the United States and China, the world's largest consumer of industrial metals.
Greater manufacturing activity coupled with increased threats to the supply chain should result in higher consumption levels in 2009, analysts said.
“It appears that copper, nickel and lead will have up consumption in 2009, world-wide,” said John Tumazos with VeryIndependentResearch.com.
“There are substantial disruptions to copper, nickel and lead mines, and the odds favour world output falling in 2010,” he said, highlighting production problems at BHP Billiton's Olympic Dam copper mine in Australia as one main issue.
Another included the prolonged strike at the company's Spence copper mine in Chile, now in its third week, while a potential strike was brewing at the Antamina copper pit in Peru.
Still, demand uncertainties lingered due to rising levels of stocks in LME warehouses.
Copper stocks at 374,050 tonnes are near six-month highs, while aluminum stocks at above 4.5 million tonnes are still within touching distance of record highs.
Aluminum closed up $13 at $1,921 a tonne, buoyed by U.S. auto sales, which hit an annualized rate of 10.46 million units in October.
Steel-making ingredient nickel ended up $100 at $17,900 a tonne, and battery material lead rose $80 to settle at $2,350.
Zinc closed up $49 at $2,229 a tonne and tin ended at $15,000 from $14,790.
Traders noted a dominant position controlling more than 90 per cent of LME stock warrants and cash contracts had resurfaced.
That has pushed the premium for cash material over the three-month contract to about $100 a tonne from $75 a tonne on Tuesday.