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 Posted - 04/15/2009 : 20:09:55
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Copper Gains in Longest Rally in 14 Months on Demand in China
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By Claudia Carpenter
April 15 (Bloomberg) -- Copper gained for a fifth consecutive session in London, the longest rally in 14 months, as falling inventories signaled demand is picking up.
Inventories in warehouses monitored by the London Metal Exchange dropped 11,600 metric tons, or 2.4 percent, to 480,400 tons, the biggest decline since Oct. 21. Futures for May delivery in Shanghai are $485 a ton more expensive than London, encouraging Chinese consumers to import more metal, said Herwig Schmidt, head of sales at Triland Metals Ltd. in London.
“This price differential works like a big vacuum cleaner,” Schmidt said. “As long as this goes on, people say, ‘let’s go with it’.”
Copper for delivery in three months rose $96, or 2 percent, to $4,795 a ton at 4:28 p.m. in London. The five-day gain is the longest since early February 2008.
Copper gained 10 percent the previous four sessions, and yesterday traded at $4,925 a metric ton, the highest since Oct. 20, on increased imports from China, the world’s largest buyer. Metal scheduled to be taken out of warehouses, known as canceled warrants, fell the most since March 17, according to London Metal Exchange figures, signaling eroding demand.
“China’s demand tends to drop at these sort of prices,” said David Thurtell, an analyst at Citigroup Inc. in London. “They had their fill.” The drop in inventories was attributable to “stuff bought in March when prices were in the low to mid-$3,000” a ton, he said.
Demand Elsewhere
Demand outside of China may be hurt the most by the high prices.
“The question is how many people will be there outside of China to rush in and buy because they’re just sitting there and looking at it,” Schmidt said. “Demand has not been very good” outside of China, he said.
Canceled copper warrants dropped 14 percent to 57,525 tons.
London-based Rio Tinto Group produced 9 percent more mined copper in the first quarter because of a recovery in output at Kennecott Utah and Grasberg mines. Output in Chile at Escondida, the world’s largest copper mine, fell 34 percent.
Chinese metal demand will rise at a “low single-digit” rate in 2009, Rio Tinto Chief Executive Officer Tom Albanese told shareholders in London today. “Given the development of a large stock and capacity overhang, prices seem unlikely to be able to stage much of a sustained rebound during the year.”
Reversing Bets
Some speculators are probably reversing bets prices will fall, Zug, Switzerland-based Tiberius Asset Management AG said yesterday. Copper open interest, or the total number of options and futures outstanding, dropped 1.8 percent over three days last week as copper prices climbed 6.8 percent.
The S&P GSCI Index of 24 raw materials has gained 6.7 percent this year. Copper is up 56 percent.
Aluminum declined $4, or 0.3 percent, to $1,509 a ton. Inventories of aluminum jumped 0.4 percent to a record 3.67 million tons. Aluminum was the only LME metal to have an inventory gain.
Doe Run Peru suspended 1,900 workers for a month because the company lacks concentrate supplies for its smelter, a union official said. The company processes zinc, lead, copper and silver.
Zinc rose $62.50, or 4.3 percent, to $1,502.50 a ton, nickel added $381, or 3.2 percent, to $12,231 a ton, and lead climbed $45.75, or 3.1 percent, to $1,530.75 a ton.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
Last Updated: April 15, 2009 12:55 EDT
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Copper Gains in Longest Rally in 14 Months
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