Tuesday, November 22, 2005


China Play Causes Wild Swings In Copper Prices

A pair of stories on copper have implications for the global economy. "Financial markets are bracing for a second major scare in as many months as investors begin to question whether China will honour millions of dollars worth of copper futures trades."

"Emerging market bonds, equities and the currencies of commodity producing countries all face some fallout if confidence in China is shaken because investor faith in China’s booming economy and huge purchasing power underpins optimism in virtually every asset class."

"'The world’s financial markets are banking on China stepping up to the plate to keep things stable,' Paul Markowski, veteran investment advisor on China, said."

Bloomberg reports those fears may be playing out. "Copper prices fell the most in three months in New York as China prepares for another public auction from reserves of the metal used in housing, appliances and cars."

"The State Reserve Bureau plans to sell 20,000 tons tomorrow. The agency offered the same amount of metal on that day. Copper rose to records in New York and London last week after the state-run China Daily newspaper said China must deliver as much to 200,000 tons of the metal by Dec. 21. 'If the bulk of that position is covered, a downside move is inevitable,' said James Koppel."

"The copper premium for immediate LME delivery, above the three-month contract, fell to $164.85 a ton today, the lowest since Nov. 1 and down from $190 a ton yesterday."

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