Copper Rallies Most in Week as Exchange Stockpiles Extend Slump
Copper prices jumped the most in more than a week as shrinking inventories signaled demand will remain steady even as global economic growth slows.
Stockpiles tracked by the London Metal Exchange dropped to a seven-month low today, tumbling 12 percent in 2010. Codelco and Freeport-McMoRan Copper & Gold, the world’s top copper producers, have warned that lower ore-grades and a dearth of new projects will constrain supplies.
Falling inventories “tell us that the level of demand is still high enough to prevent surpluses from accumulating on exchanges,” Edward Meir, an analyst at MF Global Holdings Ltd. in Darien, Connecticut, said today in a report.
Copper futures for September delivery climbed 5.5 cents, or 1.9 percent, to $2.971 a pound on the Comex in New York, the biggest gain for a most-active contract since June 25. The price is up 31 percent from a year ago.
The metal also rose as the dollar weakened and equity markets gained, said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York.
“Copper is being supported by the outside markets,” Groenewegen said. “There are still economic uncertainties.”
Slower U.S. Growth
A gauge of growth in U.S. service industries, which account for the bulk of the economy, fell to a four-month low in June, a private report showed today.
On the LME, copper for delivery in three months added $136, or 2.1 percent, to $6,605 a metric ton ($3 a pound), gaining for a third straight session. Prices are down 10 percent this year, partly on concern that slowing economic growth will erode demand for copper wires and plumbing.
“While we believe that the copper market still faces some downward pressure, as economic conditions are likely to continue to erode, we expect that considerable buying support could emerge at the $5,500-$6,000 level,” Daniel Brebner, an analyst at Deutsche Bank AG in London, said today in a report. “We believe that the market already reflects many of the concerns highlighted.”
Aluminum, nickel, lead, tin and zinc also gained in London.
To contact the reporters on the story: Anna Stablum in London at astablum@bloomberg.net; Millie Munshi in New York at mmunshi@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
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