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Comex copper ends softer as funds pare positions

NEW YORK: Comex copper futures on Thursday backed down from earlier gains, slipping on fund liquidation and arbitrage selling as tight ranges prevented prices from spiking, traders said.

"It looks like a little sell-off after the initial surge," said one trader. "They're mostly funds, but the outrights are the (arbitrage) guys and some trade."

Floor sources said the only late activity in March was selling as funds switched into the May contract.

"The funds got a little too aggressive and they are regurgitating some of their excess contracts," president of Sogemin Metals Richard Hirsch said.

Active March settled off 0.50 cent at 83.40 cents a lb after trading 83.30 to 84.70 cents. Spot February lost 0.50 to 84.10 cents and May shed 0.40 to 84.65 cents. The rest declined 0.35 to 0.45 cent.

Thursday's estimated final volume for Comex copper was 25,000 contracts, compared to Wednesday's official count of 15,258 contracts.

"I suspect that a lot of the trade is rolling over from the March to the May contract," said Refco analyst Jim Steel. "That's going to increase over the next couple of days," he added.

March copper awaits its first notice day next Wednesday.

Steel said that the near-term supply of copper stocks in warehouses could also drive the market.

LME copper stocks fell 1,075 tonnes to 789,950 tonnes on Thursday, while Comex stocks were up 125 short tons to 95,369 tons.

"We've had another day of lower LME stocks, which I think is becoming more important," Steel said. "Everybody's forecasting increasingly good demand, and the only way for this demand to be serviced is for (copper) stocks to fall. That's probably the key to looking longer term in the market."

A booming automotive sector and healthy housing starts numbers fostered demand this year in the United States, as has economic recovery in most of Asia, analysts said.

Steel said he saw Japan lagging other regions, while demand in Europe was "turning up particularly well."

Copper consumption in Japan is likely to rise just 2.5 percent this year, according industry forecasts, while consumption in other regions is expected to be more robust this year.

A fall in January U.S. durables good orders on Thursday were not seen as a threat to the copper market.

"I don't think the 1.3 (percent decline) hurt us on a today basis," said Hirsch. "I think copper fell for other technical, profit-taking reasons. We're trying to form a bottom somewhere between 83 and 85 cents. That is the range right now."

On the LME, copper was rebuffed by profit-taking near key resistance levels, after three-month futures reached as high as $1,877 a tonne in early dealing.

In evening inter-office trading, three-months copper was at $1,852 a tonne down from the afternoon kerb close of $1,868.

In industry news, Chile's Escondida copper mine, the world's largest, expects its oxide plant to produce 137,000 tonnes of cathodes this calendar year compared with 131,752 tonnes last year, said a company spokeswoman on Thursday.

The $451 million plant has a design capacity of 125,000 tonnes of cathodes per year and harvested its first cathodes in November 1998.

Separately, Chinese copper producer Jinlong Copper Co Ltd has applied to the London Metal Exchange (LME) for its 'JINTUN' brand to be listed as good delivery against LME contracts.-Reuters