Asia metal recovery elusive

Asia metal recovery elusive

SINGAPORE (Reuters): Recovery is looking more elusive for base metals in Asia as regional currencies crashed to record lows against the U.S. dollar on Friday, dealers said.

"Because of this currency situation, I can only see a dark picture. There is no light at the end of the tunnel," said a dealer with a major European house.

"Whether or not the Asia metals market comes out from its doldrums will depend a lot on the currencies first," said another dealer.

The slowdown in Asia's Tiger economies had led to a drastic drop in demand for infrastructure materials like steel products, as countries shelved or canceled major projects.

"The situation will only worsen for most of the metals in Asia," said the dealer with a European house.

Dealers said spot deals had dwindled and were isolated to small volumes of very specialized and high quality metals.

Dealers estimated about 20,000 tons of superior quality Chilean copper for delivery into China in the first quarter had been sold from the warehouse.

The price could not be confirmed but potential sellers said offers were at $25-$30 a ton over the London Metal Exchange (LME) cash in the warehouse.

Copper premiums, seen at $20-30 to the LME, were likely to head south, dealers said.

Aluminum premiums, holding at $70-75, could see support with a stronger European demand providing an alternative market.

The mainland's copper output was down 19.6 percent to 887,000 tons in November while its aluminum output was down by 0.7 percent to 1.8 million tons.

However for the first 11 months, Chinese production was up by 15 percent while aluminum production was up by 15.6 percent compared to the same period a year ago.