Copper Advances as Falling Inventories Boost Demand Speculation

Thursday, May 20, 2010

Copper advanced, extending a rebound from a three-month low on May 17, as declining stockpiles boosted speculation that global demand for the metal used in pipes and wires may be increasing. Zinc and nickel also gained.

Three-month delivery copper on the London Metal Exchange climbed as much as 3.3 percent to $6,719.75 a metric ton and traded at $6,626 at 2:17 p.m. in Shanghai. Zinc jumped as much as 3.6 percent to $1,925 a ton and nickel climbed 2.4 percent to $21,800 a ton.

Copper inventories monitored by the LME fell this week to the lowest since Dec. 22, 2009. Zinc stockpiles have dropped 1.2 percent from this year’s high on May 6 and nickel inventories have shrunk 12 percent this year. A pick-up in global metals demand “has become clearly visible through falling LME inventories,” Barclays Capital said in a report yesterday.

“Falling inventories are among signals that indicate growing demand,” Tan Wentao, an analyst at HNA Topwin Futures Co., said from Shanghai.

Still, Japan’s economy grew less than forecast in the first quarter as an export-led recovery failed to stoke consumer spending, according to data today. The country’s equities fell and Finance Minister Naoto Kan said he expects the Bank of Japan to support an economy that’s not in a self-sustained recovery.

“Bearish sentiment may be a catalyst for further declines,” Tan said.

Government Debt

The Reuters/Jefferies CRB Index of 19 commodities dropped to a seven-month low earlier this week on speculation European efforts to curb government debt will erode economic growth and China may step up measures to tackle asset bubbles. Copper futures dropped to $6,429 a ton on May 17.

“The short-term outlook for base metals and copper in particular remains very much confused,” Barclays Capital analysts led by Nicholas Snowdon said in the report. While fundamentals are “constructive,” there has been a “period of heightened uncertainty in financial markets,” they wrote.

Copper for August delivery in Shanghai gained as much as 2.4 percent to 54,380 yuan ($7,951) a ton and last traded at 53,900 yuan. Shanghai aluminum climbed 0.4 percent to 15,225 yuan and zinc advanced 1.6 percent to 15,590 yuan.

Aluminum in London was little changed at $2,003.25 a ton, lead increased 1.1 percent to $1,175 a ton and tin dropped 1.2 percent to $17,250 a ton.

 

Source: Blooomberg