Base Metals Rally As Dollar Slides
By LAUREN VILLAGRAN
NEW YORK – Industrial metals rose broadly Monday as investors sought bargains in a market that has seen prices plummet while supplies increased. The dollar’s decline to new lows gave foreign buyers even deeper discounts on copper, lead and other metals.
Other commodities finished mixed, with energy and agricultural futures mostly lower while precious metals made gains.
The industrial metals market has suffered steep declines in recent months amid concerns that sluggish economic growth in the U.S. could eventually slow industrial development around the world. There are signs demand has slowed for the metals used to wire buildings for electricity, coat steel or manufacture autos. Stockpiles of copper, zinc, nickel and other metals have swelled.
But with prices looking a bit cheaper, buyers returned to the market on Monday after the a long holiday weekend. U.S. markets were closed on Thursday for Thanksgiving, and trading was light Friday.
“Prices have touched lows, and there is a bit of bargain-hunting coming through,” said UBS analyst Robin Bhar. “We haven’t miraculously resolved all the problems about the credit crunch and slowing growth overnight … but nothing goes down in a straight line forever. I suspect this will meet with fresh selling.”
December copper rose 3.2 cents to settle at $3.023 a pound on the New York Mercantile Exchange. Copper rose 2.8 percent on the London Metal Exchange, where zinc jumped 6.3 percent; lead gained 5.6 percent and tin rose 2.8 percent.
Economic news was sparse on Monday. Later this week, investors will watch for the latest readings on orders of durable goods, existing home sales and consumer confidence.
Meanwhile, the dollar slouched to a low against the euro and declined broadly versus other world currencies. The euro was quoted at $1.4868 late Monday after buying a record $1.4885 in early trading.
A weak greenback makes commodities, which are priced in dollars, appear cheaper to buyers abroad.
Investors also appeared encouraged by rumblings of more consolidation in the mining industry, which has seen big combinations over the past couple of years.
British miner Rio Tinto PLC defended its deflection of a takeover by Australian rival BHP Billiton PLC on Monday, saying the buyout would have to come at a higher value than the proposed stock-swap valued at $131.12 billion, the Wall Street Journal reported. Rio Tinto Chief Executive Tom Albanese said at an investor presentation in London on Monday that BHP needs Rio more – not the other way around.
Meanwhile, aluminum producer United Company Rusal on Friday said it agreed to buy a 25-percent-plus-one share stake in metals conglomerate OAO Norilsk Nickel from former general director Mikhail Prokhorov. It was the latest bid for ownership in Norilsk, the world’s largest nickel miner.
“There is a lot of corporate M&A activity in the sector and to some extent that may help metals prices,” said Bhar. “The theory goes that producers will have more control over the commodity price cycle” if there are fewer at the top, resulting in more discipline in cutting production when inventories build.
Elsewhere, energy prices pulled back. Iranian Oil Minister Gholam Hossein said over the weekend his country is willing to raise crude production if needed. His comments added to speculation that the Organization for Petroleum Exporting Countries may increase output when the group meets Dec. 5.
Light, sweet crude fell 48 cents to settle at $97.70 a barrel on the Nymex after crossing $99 overnight. Gasoline futures also fell, dipping 2.56 cents to settle at $2.4414 a gallon on the Nymex.
Colder weather in parts of the U.S. bolstered heating oil futures, which rose 0.24 cent to settle at $2.7066 a gallon on the Nymex.
Precious metals rose as the dollar sagged. Investors often shift assets to precious metals to hedge against currency volatility. December gold gained $1.80 to end at $826.50 an ounce on the Nymex, while December silver added 9.5 cents to close at $14.83 an ounce.
Agricultural futures ended mixed. December corn fell 3.5 cents to $3.85 a bushel, while January soybeans rose 3.5 cents a bushel to $11.037 a bushel on the Chicago Board of Trade. December wheat futures fell 12.5 cents to $8.14 a bushel.