BLBG: Copper Rises on Speculation U.S., China Spending to Spur Demand
Copper prices jumped the most in a week on speculation that government spending plans in the U.S. and China will spur economic growth and boost demand for the metal used in pipes and wires.
China, the world’s biggest copper user, started investing a second part of a 4 trillion yuan ($580 billion) stimulus plan and may enact another to boost petroleum industries. In the U.S. Senate, debate began yesterday on an estimated $885 billion spending plan supported by President Barack Obama. Copper rose 4.1 percent in January on speculation that demand will revive.
Traders “await the outcome of whatever impact the combined economic stimulus packages” will have, Alex Heath, the head of industrial metals at RBC Capital Markets in London, said in a report. “The momentum does look to be favoring further gains.”
Copper futures for March delivery surged 8.3 cents, or 5.8 percent, to $1.514 a pound at 11:22 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest advance for a most-active contract since Jan. 26. The January gain was the first monthly advance since June.
China is considering additional measures beyond 4 trillion yuan in spending to support its economy, the Financial Times reported yesterday. Obama’s plan for the U.S. will include money for projects incuding roads and bridges.
‘Direct Impact’
“The infrastructure-related portions of the fiscal stimulus packages will have a direct impact on metals demand,” Michael Widmer, an analyst at BNP Paribas SA in London, said in a report.
China’s stimulus plan will boost copper demand 6.2 percent this year, and spending in the U.S. will increase use of the metal by 4.1 percent, Widmer said.
Copper’s gains accelerated after a report showed more Americans signed contracts in December to buy previously owned homes for the first time in four months.
“The home number today really helped kick the price higher,” said Donald Selkin, the chief market strategist at National Securities Corp. in New York.
The index of pending home resales climbed 6.3 percent to 87.7, the first increase since August, the National Association of Realtors said. Builders are the biggest users of copper.
“We still need to see some more signs of economic recovery before copper can move out of its trading range,” Selkin said.
The metal will trade from $1.30 to $1.60 until more evidence of demand emerges, Selkin said. Copper tumbled 54 percent last year as the global economy tilted into a recession.
On the London Metal Exchange, copper for delivery in three months jumped $185, or 5.8 percent, to $3,360 a metric ton ($1.52 a pound). The price reached a record $8,940 on July 2.
