Copper Rises From Three-Week Low on Signs of Stronger Demand

Tuesday, Apr 20, 2010

Copper rose from a three-week low in London on signs of stronger consumption and an easing of concern about potential repercussions from a U.S. government lawsuit against Goldman Sachs Group Inc.

Shipments of copper wire and cable in Japan, the world’s fourth-biggest user of the metal, gained 13 percent in March on revived demand from the auto and electric industries. The U.S. Securities and Exchange Commission split in a vote on approving an enforcement case against Goldman Sachs, according to two people with knowledge of the vote.

“We are seeing a bit of a reversal,” Peter Fertig, owner of Hainburg, Germany-based Quantitative Commodity Research Ltd., said by telephone. “Partly, of course, it relates to the developments about Goldman Sachs.”

Copper for delivery in three months climbed $135, or 1.8 percent, to $7,830 a metric ton at 10:15 a.m. on the London Metal Exchange. The contract yesterday touched $7,610.25, the lowest intraday price since March 29. Futures for July delivery gained 1.3 percent to $3.563 a pound on the Comex in New York. All of the six main metals traded on the LME rose.

LME prices may increase to the “mid-$8,000” level in coming months as demand improves, Barclays Capital said.

‘Unfounded’ Claim

Copper slid 3.1 percent in the prior two sessions in London after the SEC claimed Goldman Sachs, one of Wall Street’s biggest raw-materials traders and brokers, misstated key facts about collateralized debt obligations tied to subprime mortgages. The claim is “unfounded,” Goldman Sachs has said. The MSCI World Index of shares gained today after two drops.

“We have seen stabilization in the equity markets,” Fertig said. “Investors had a first shock, but now they are ready to buy in again.”

The SEC split 3-2 along party lines in the vote, according to the people. Goldman Sachs shares plummeted 13 percent on April 16. Industrial metals may fall again if the “SEC comes up with further accusations against other banks,” Fertig said.

Copper-wire and cable shipments, including exports and domestic business, gained to 60,200 tons last month from 53,198 tons a year earlier, the Japanese Electric Wire and Cable Makers’ Association said today. The increase was the third in a row.

Labor Shortages

Demand is expected to improve in the U.S. and Europe “as restocking takes hold,” Barclays said. “Rising cost pressures, skilled-labor shortages, declining ore grades, delays to new projects and challenges in bringing new production to market” may curb output, and a lack of scrap “could prove more of a support to primary metal demand than currently expected in 2010,” the bank said.

Still, prices are likely “to come down a little bit” during the Northern Hemisphere’s summer, said Fertig of Quantitative Commodity Research. “Measures discussed to implement more restrictive interest rates and credit policy -- for example, curb lending -- could have a dampening impact,” he said.

The cabinet in China, the world’s largest copper user, has said stricter measures to control speculation are needed after property prices in 70 cities jumped a record 11.7 percent in March. The State Council in an April 17 statement told banks to stop loans for third-home purchases.

Copper stockpiles tracked by the LME slipped 0.1 percent to 507,525 tons, for a drop of 3 percent over the past month. Bookings to remove metal from inventories declined 1.4 percent to 14,375 tons.

Aluminum for three-month delivery on the LME rose 1.3 percent to $2,400 a ton, tin climbed 1.1 percent to $19,006 a ton and nickel advanced 2.2 percent to $27,293 a ton. Lead rose 1.6 percent to $2,272 a ton and zinc gained 1.3 percent to $2,420 a ton.

 

Source: Bloomberg