Metalnewsnet 24 Mar:

The increase in world copper prices may be running out of steam. Copper futures for May and June delivery at $3.40/lb on the Comex in New York are close to the March to-date average of $3.37 on the London Metal Exchange (LME). Reason: Tighter credit in India, an erratic dollar, reports of reduced economic stimulus and monetary tightening policies in China and dormant demand in Europe.

"The market is waiting for direction," analyst Gayle Berry at Barclays Capital in London tells Reuters. "It is waiting for some sort of convincing data flow. What is happening just now is that we're getting a lot of mixed messages-that's why you are seeing this push and pull."

In 2009, LME copper prices almost doubled-from an average $1.46 in January to $3.17 in December-- as the dollar dropped 4.2%, which bolstered demand for the red metal and other commodities as alternative assets. This year, the dollar has been up and down so copper was $3.35 in January but $3.11 in February on concerns the global economy's recovery will be tepid.

"The dollar is going to continue be important for copper," Matthew Zeman, a trader at LaSalle Futures Group in New York, tells Bloomberg. "I don't see copper going much higher until we get a catalyst to drive it out of its trading range. The economic picture still looks mixed."

Gains were capped on concern that rising global interest rates and budget deficits in Europe could stifle economic growth, Zeman says, pointing out that the Reserve Bank of India raised borrowing costs for the first time in almost two years. China, where inflation reached the highest rate in 16 months in February, also may make credit more expensive. "The fact that China may tighten and India is already tightening is weighing heavily," Lannie Cohen, the president of Capitol Commodity Services in Indianapolis, tells Bloomberg.

Also, there is the possibility that China, the world's biggest copper consumer, may accelerate a reduction in economic stimulus. Reason: Too much metal in inventory. Reuters says that warehouse inventories tallied by the Shanghai Futures Exchange are the highest since 2003. Yet, shipments of refined copper into China last increased 12% from January.

"People at some point should be asking themselves if these imports are for real or if they are for stockpiling," writes analyst Eugen Weinberg at Commerzbank in Frankfurt. "Real end-user demand for copper in China isn't as strong as the import data shows."

(From Purchasing)