Copper Climbs to 27-Month High on Prospects for Demand, Weakening Dollar

Copper rose to a 27-month high in New York and London on prospects for increased consumption of the metal.

Average prices this quarter may be 10 percent higher than in the prior three months as demand outpaces supply growth, according to a state purchasing agency in South Korea, the world’s fourth-biggest copper consumer. Codelco, the largest producer, yesterday predicted a “tighter” market. Copper also gained today as the dollar slumped.

“This morning is just a short-term reaction to a bit of further dollar weakness,” Leon Westgate, an analyst at Standard Bank Plc in London, said by telephone.

Copper for delivery in December added 3.7 cents, or 1 percent, to $3.8265 a pound at 7:57 a.m. on the Comex in New York. The contract touched $3.8385, the highest price since July 8, 2008. Copper for delivery in three months climbed 0.7 percent to $8,403 a metric ton on the London Metal Exchange, and tin advanced to a record.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell for a second day to near the lowest level since January. A weaker dollar makes metals priced in the currency cheaper in terms of other monies and fuels demand for raw materials as an alternative investment.

‘Very Strong’ Prices

Copper may average more than $8,000 a ton in the fourth quarter, said Lee Key Man, head of the international goods bureau at South Korea’s Public Procurement Service. That compares with about $7,267 in the third quarter, data compiled by Bloomberg shows. The metal may advance through 2011’s first half, Lee said.

“The general consensus is that copper prices will be very strong over the next couple of years,” Westgate said.

Demand from China, the world’s biggest consumer, and a lack of new supply lie behind Santiago-based Codelco’s forecast, Chief Executive Officer Diego Hernandez said. Prices will need to stay higher than in the past for metals producers to cope with rising costs and lower ore quality, he said.

Copper will average $8,438 a ton next year, compared with $7,344 in 2010, said Fred Demler, head of global commodities at MF Global. The world is entering “a generally strong period for all commodities,” and copper, aluminum, zinc and nickel will all climb in next year’s first quarter, he said.

Imports Into China

“China remains the main driver of demand for metals,” Commerzbank AG said in a research note today. The bank predicted “imports at a relatively high level in the coming months,” citing capacity reductions stemming from steps taken by the government to save energy.

Still, imports of copper and products into China dropped for the first time in three months in September as lower domestic prices reduced the appeal of overseas purchases. Shipments declined 2.9 percent from August to 368,410 tons, the General Administration of Customs said.

LME copper stockpiles declined for a second day, slipping 0.1 percent to 371,275 tons, daily exchange figures showed. Orders to draw copper from LME stocks, or canceled warrants, fell 1 percent to 24,350 tons.

Tin for three-month delivery on the LME rose 0.2 percent to $26,550 a ton after touching $27,100. The metal has jumped 57 percent this year, leading advances on the exchange, after production was disrupted in Indonesia and the Democratic Republic of the Congo.

Lead rose 2.3 percent to $2,430 a ton after reaching $2,440.25, the highest intraday price since Jan. 20. Nickel climbed 1.2 percent to $24,350 a ton, aluminum was little changed at $2,436.75 a ton and zinc rose 1.9 percent to $2,412 a ton.

To contact the reporter on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter@bloomberg.net.

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