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MARGRAF ON THE MARKETS
27253 Timberlane,
Monee, Illinois

(June 12, 1997) COPPER: HIGHLIGHTS--The uptrend steepened sharply this week after last week's correction, to new contract highs. 


Technical Analyses

			Trends     Futures


Long-Term 		Up   	Close      121.35 [5-day change = -4.35]
Intermediate   		Up   	Resistance 122.90
Short-Term     		Up   	Support    120.60, 115, 25, 109.00
FUNDAMENTALS--BULLISH: China is expected to use any 1997 summer price softness as an opportunity for rebuilding commercial and reserve stocks until inventory levels return to levels of 2-1/2 years ago. Copper concentrates stocks are at 150k mt on site at Ok Tedi Mining, Papua as low water level in the Fly river have curtailed shipment of urgently needed fuel imports and concentrates exports. Without rainfall soon, the fuel shortage will cause remaining operations to cease shortly. Backwardation (premium of spot versus 3-month forward contract) is now quoted in Asia at $87- 88/mt, evidencing current tightness. World application of JIT inventory practice continues to grow; the current tight supply condition causes "just-in-time" practitioners to be very nervous, aggressive buyers. U.S. industrial demand has grown at a rate exceeding earlier projections.

FUNDAMENTALS--BEARISH: Chines internal copper prices have softened a bit due to low current demand; Chinese smelters are considering boosting current spot export to Asian users to benefit from high current prices. World copper production has the potential of exceeding demand by 175k mt in 1997; assuming 75k mt will replenish current tight pipeline float, 100k mt surplus yet remains. The normal seasonal June copper price weakness will likely be deferred into the 3rd quarter in 1997 because of the recent strike at Canada's Inco Mining.

RECOMMENDATIONS--POSITION RECAP: Long at average of 116.60: at 111.90 on 4/30 resistance violation ("rv"); added at 115.40 on 5/15 gap rv; added at 117.30 on 5/20 rv; added at 120.00 on 5/28 rv; added at 116.90 on 6/2 per rec; added at 116.40 on 6/6 per rec. NEW: Take profits on half position at market on opening. Reestablish at 116.80. Exit at first signal (trailing stop, parabolic or Margraf Exit Rule #2).

Ernest Margraf

Consensus National Futures and Financial On Line Index
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