Copper May Rise in New York on Weakening Dollar, Contracting Inventories

Copper may rise in New York as a weaker dollar fuels demand for industrial metals as an alternative investment and inventories shrink.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.4 percent, making dollar-priced metals cheaper in terms of other monies. Stockpiles of copper tracked by the London Metal Exchange slid after declining for a 30th week in a row last week.

“Ample liquidity, a weaker dollar, a stronger yuan and robust demand from China” are supporting prices of industrial metals, said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. He predicted “further upward moves.”

Copper for delivery in December gained 0.5 cent, or 0.1 percent, to $3.527 a pound at 7:57 a.m. on the Comex in New York. The most-active contract touched $3.5555, the highest price since April 26. Copper for delivery in three months rose 0.4 percent to $7,750 a metric ton on the LME.

Cash copper’s discount to the three-month contract shrank to $9 a ton on Sept. 17, the narrowest intraday level since Sept. 14, 2009. The so-called contango was at $10.75 in the prior session, according to the latest LME data.

Scarcity Concern

“With this move being led by spot prices pushing higher, it certainly looks bullish,” said Nic Brown, an analyst at Natixis Commodity Markets Ltd. in London. The shift toward a so- called backwardation, when cash copper trades at a premium to the three-month contract, “reflects growing concerns about scarcity of physical metal,” he said.

The dollar slid on speculation the Federal Reserve will say tomorrow it’s considering further measures to keep borrowing costs low. Policy makers are likely to affirm the central bank’s pledge to keep interest rates low for an “extended period,” according to economists surveyed by Bloomberg.

A report today may signal that the housing market remains poor in the U.S., the world’s second-biggest copper consumer after China. The National Association of Home Builders/Wells Fargo confidence index was probably at 14 this month, from 13 in August, according to a Bloomberg News survey. The figures are due at 10 a.m. in Washington.

Index readings below 50 indicate that most respondents said conditions are poor. Construction accounts for a quarter of copper demand, according to the Copper Development Association.

Smaller Inventories

Financial markets in China, the world’s largest metals user, are closed from today to Sept. 24 for the Mid-Autumn festival holiday.

LME copper stockpiles fell 0.4 percent to 382,500 tons, daily exchange figures show. Orders to draw copper from inventories, or canceled warrants, declined 2.8 percent to 28,950 tons. Two parties each held between 30 percent and 39 percent of the stockpiled metal as of Sept. 16.

Tin for three-month delivery on the LME was unchanged at $23,600 a ton after touching $23,800, the highest intraday price since July 16, 2008, in the prior session. The metal is this year’s best LME performer, adding 39 percent, compared with the 26 percent advance by closest rival nickel.

Tin, which touched a record $25,500 a ton in May 2008, has been bolstered by disruptions to production in the Democratic Republic of Congo and Indonesia. Shipments from Indonesia, the largest exporter, may drop 19 percent this year to 80,000 tons, said Alberth Tubogu, export director for mining and industry products at the trade ministry.

Nickel, Aluminum

LME tin stockpiles rose 0.2 percent to 13,655 tons, paring this year’s decline to 49 percent. Cash tin’s discount to the three-month contract shrank to $9 a ton as of Sept. 17 from $36 a week earlier, according to LME data.

Nickel rose 0.8 percent to $23,375 a ton after reaching $23,570, the highest intraday price since May 10, in the prior session. Global stainless-steel output, accounting for two- thirds of total demand, rose 44 percent to 15.65 million tons in the year’s first half, the International Stainless Steel Forum said on its website today.

Aluminum advanced 1.4 percent to $2,210 a ton. Canceled warrants jumped 67 percent, the most since May 2007, to 251,825 tons, the highest level since July 22. They have more than doubled in less than two weeks from this year’s low on Sept. 8. LME inventories dropped for a third day to 4.39 million tons, daily figures showed.

“While this may simply be a rent deal being put in place by a trade player, it’s still something to keep an eye on,” Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe Ltd. in London, said in a report. “It’s very easy to see the light metal now testing resistance at $2,250 and then targeting $2,500.”

Zinc added 1.4 percent to $2,182 a ton and lead climbed 0.5 percent to $2,213 a ton.

To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

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