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LONDON, May 25 (Reuters) - Volatility will be the key
characteristic for unpredictable commodity markets on Thursday
and volumes will be thin as investors steer clear of the
unforgiving trading conditions, dealers said.
"With this level of volatility, the market in some ways
ceases to be a 'real' market," Standard Bank said in a daily
report.
"Instead players lose their ability to trade in a way that
is practical and economically viable, instead enticing many to
sit on the sidelines, and leaving what is left, to become a home
for the few."
London Metal Exchange copper futures lost $630, or
7.4 percent, to close at $7,830 a tonne on Wednesday after
dipping as much as 9 percent to $7,700, the largest daily
decline since Oct. 13, 2004.
On Tuesday copper made its biggest-ever daily gain of 11.4
percent.
ASCENSION DAY HOLIDAY
Dealers said volumes would be further thinned by the
Ascension Day holiday in parts of Europe,
By 0756 GMT, copper was at $7,860/$7,910, up $30. Earlier on
Thursday the market dipped to $7,735 in electronic trade.
"The market is very volatile, very choppy and very hard to
trade," an LME dealer said in Hong Kong.
"Even a very tiny position can cost you a fortune. That's why
nervousness will continue," he said.
Supply news was mixed as union workers at Grupo Mexico's
giant Cananea copper mine shut out some subcontract
labourers on Wednesday. [ID:nN24145627]. The company is already
dealing with a strike at its La Caridad operation.
Cananea produced 118,741 tonnes of copper in concentrates in
2005, while La Caridad produced 122,317 tonnes.
But Anglo-Australian mining giant BHP Billiton said it
expected to produce the first copper cathodes from its $870
million Escondida sulfide leach project in Chile next month.
[nN24329371].
It added that its nearly $1 billion Spence copper mine will
produce its first cathodes in December of this year. Together
the projects will add close to 400,000 tonnes of copper
production to the BHP Billiton copper portfolio.
"The BHP Billiton news has been factored in to prices, but
the industrial unrest may be what the market needs to support
it. The one thing the copper is susceptible to is supply
disruptions," BaseMetals.com William Adams said.
"On the other side is the broader financial market
outlook...and looks like the weakness in emerging markets is
impacting more established equity markets," he said.
Adams said there was a concern that higher interest rates
and inflation could bring a correction lower across all
financial markets, including commodities.
Aluminium was at $2,765/$2,775 a tonne after
shedding $120 or 4.2 percent to close at $2,750 on Wednesday.
"Aluminium has gone up very slowly, but then came off
sharply," another dealer said.
"But people are still looking for aluminium to get above
$3,000. It's been a laggard and investors see it as the next big
star. I think it could outperform the others if markets do
fall."
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