Copper Heads for Best Week in Five Months as Inventories Shrink
Copper headed for the best week in five months in New York and London as shrinking inventories signaled an improved outlook for demand.
Stockpiles tracked by the London Metal Exchange slid for a 22nd week in a row this week, the longest streak since 2004, data compiled by Bloomberg shows. Bookings to remove metal from warehouses increased 15 percent, the most in two months. Inventories also contracted in China, the world’s biggest user of the metal.
“Supply dynamics look quite tight over the next couple of years, so we’d expect to see a growing deficit eating progressively into current stock levels,” Nic Brown, an analyst at Natixis Commodity Markets Ltd. in London, said by phone.
Futures for September delivery gained 0.6 cent, or 0.2 percent, to $3.1705 a pound at 8:06 a.m. on the Comex in New York. The most-active contract is up 8.2 percent this week, the most since the week ended Feb. 19. Copper for delivery in three months lost 0.1 percent to $7,000 a metric ton on the LME.
“After the recent bounce, there may yet be some setbacks, but we would see any corrections as good buying opportunities,” Brown said.
Prices climbed this week as global equity markets rallied. The U.S. Standard & Poor’s 500 Index has added 2.7 percent, and the Shanghai Composite Index is up 6.1 percent, the most since the week ended Dec. 4. Chinese shares gained on speculation the government will refrain from taking more steps to curb bank lending and property prices.
Chinese Expansion
Copper’s advance this week “seems to have been based on the recovery in Chinese equities,” Brown said. Investors were looking beyond recent policy tightening on the view that the government would be more tolerant of “future Chinese growth,” he said.
LME copper has dropped 5.1 percent this year, partly on concern about steps taken by China’s government to restrain the country’s surging economy. Prices also retreated on speculation that Europe’s sovereign debt-crisis might stall the region’s economic rebound. European regulators will publish results of “stress tests” on banks today.
“I’m not sure the stress tests are too important for base metals, except to the extent that they might hit equity markets or result in another bout of risk aversion,” said Brown.
Europe probably will account for about 20 percent of global copper usage this year, according to Barclays Capital.
Dollar Rebounds
Prices pared gains today as the dollar rebounded. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, was recently little changed after dropping as much as 0.5 percent. A weaker dollar makes metals priced in the currency cheaper in terms of other monies.
LME-tracked copper inventories rose today after 25 drops in a row, climbing 0.8 percent to 419,650 tons. The streak of declines was the longest in more than a year. Stockpiles are still down 16 percent this year and headed for the first annual drop since 2004.
Copper stockpiles in Shanghai declined to 113,922 tons this week, the lowest level in almost six months, according to a weekly statement from the city’s futures exchange today.
Bookings to remove copper from LME warehouses fell for the first day in four, sliding 2.5 percent to 37,575 tons. Yesterday they reached the highest level since June 2, 2009.
Investor Survey
Copper may rise next week on speculation that demand will maintain its pace as output from mines drops at leading producers, a survey showed. Nine of 15 analysts, investors and traders surveyed by Bloomberg, or 60 percent, said the metal will gain.
Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper miner, said this week second-quarter mined copper output slid 13 percent from a year earlier. Also this week, BHP Billiton Ltd., the third-biggest producer, said output of the metal from mines dropped 5 percent from the prior year in the three months through June.
Tin for three-month delivery on the LME gained 0.5 percent to $18,670 a ton after reaching $18,801, the highest intraday price since April 27. Aluminum fell 0.7 percent to $2,030 a ton and zinc dropped 1.4 percent to $1,921 a ton. Lead advanced 0.4 percent to $1,948 a ton and nickel climbed 1 percent to $20,450 a ton.
To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.
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