Copper rose to a 31-month high in New York and reached a record in London on speculation that an extension of U.S. tax cuts will help bolster the economy, increasing demand for the industrial metal.
President Barack Obama said he’ll agree to extend all Bush-era tax cuts by two years. Ireland’s austerity measures helped ease concern Europe’s debt crisis will spread. Copper also gained as China’s benchmark money-market rate fell the most in three years and inventories tracked by the London Metal Exchange shrank further.
“Prices are up again today as favorable messages surrounding stimulus in the U.S. and continued demand in China emerge,” John Meyer, an analyst at Fairfax IS, said in a report.
Copper for March delivery added 4.15 cents, or 1 percent, to settle at $4.0495 a pound at 1:20 p.m. on the Comex in New York. Prices reached $4.1315, the highest level since May 5, 2008, when they touched a record $4.2605.
On the LME, copper for three-month delivery climbed as high as $9,044 a metric ton, surpassing the previous peak of $8,966 on Nov. 11. The contract rose $110.50, or 1.3 percent, to $8,880 a ton.
Record Open Interest
Open interest in LME copper, or futures outstanding, rose to a record 310,740 contracts yesterday, according to data compiled by Bloomberg.
“The recent trend of rising open interest and higher prices suggests that the addition of new long positions has been the main driver of the latest move,” Leon Westgate, a London-based analyst at Standard Bank Plc, wrote in a report today. Some traders have also been buying contracts to close out wagers on declines, “exacerbating some of the price action,” he said.
Copper stockpiles in LME warehouses have shrunk 30 percent this year, dropping today to 351,375 tons, the lowest level since October 2009, exchange data show. Inventories monitored by the Shanghai Futures Exchange fell last week for the second straight time.
Demand will outpace supply by 367,500 tons next year, enough for wires, pipes and appliances in about 1.8 million U.S. homes, according to the median forecast of 12 analysts surveyed by Bloomberg. Stockpiles may drop to an all-time low of less than one week’s usage, according to Michael Widmer, a London-based metals analyst at Bank of America Merrill Lynch.
Demand for copper, used in everything from smart phones to brake pads, will increase 4.2 percent next year, compared with a 2.6 percent gain in production, Barclays Capital said in a report Nov. 11. Supplies fell 363,000 tons short of demand in the first eight months of this year, the International Copper Study Group said Nov. 23.
Mining companies have failed to keep pace with demand because new reserves are harder to find and the quality of ore is declining, meaning less metal is extracted from each ton of earth. Average grades declined to about 1.1 percent this year from 1.6 percent in 1990, according to Guildford, England-based researcher Brook Hunt, a Wood Mackenzie company.
The potential for exchange-traded products has helped the rally. ETF Securities Ltd., BlackRock Inc. and JPMorgan Chase & Co. have said they plan to start funds backed by the metal. ETF Securities said today it will introduce ETPs backed by copper, tin and nickel on Dec. 10.
One unidentified company held between 50 percent and 79 percent of LME copper stockpiles from Nov. 22 to Dec. 2, exchange data show. Buyers on Dec. 1 paid $74 a ton, the largest premium in two years, for immediate supply relative to the three-month contract. The gap was last at $50.
Aluminum was unchanged on the LME. Lead, nickel and zinc rose, while tin fell.