BLBG: Copper Rises for Second Straight Week on China’s Demand Outlook
Copper prices rose, capping the second straight weekly gain, on renewed optimism that demand will climb in China, the world’s biggest metal user.
Zhou Xiaochuan, the head of China’s central bank, pledged fast and forceful policies to restore confidence and said he saw “signs of stabilization and recovery” in the world’s third- biggest economy. Copper jumped 9.8 percent this week on speculation that government spending will help boost economic expansion in China and spur metal demand.
“China served up a fresh dose of optimism by saying its economy was recovering and promising more swift action to absorb the shock of the global financial crisis,” Alex Heath, the head of industrial metals trading at RBC Capital Markets in London, said in a report.
Copper futures for May delivery rose 3.55 cents, or 2.1 percent, to $1.689 a pound on the Comex division of the New York Mercantile Exchange, The metal gained 7.4 percent last week and is up 20 percent this year.
China is ready to buy copper and other industrial metals for reserves, Reuters reported, citing government-owned trading company China Minmetals Corp. The country’s refined-copper imports may reach 2 million metric tons this year as the State Reserve Bureau adds to inventories, Macquarie Group Ltd. forecast this week. That was up from 1.4 million tons last year, the bank said.
“The view tends to be that there could be the start of restocking in China,” said Bart Melek, a commodity strategist at BMO Capital Markets in Toronto. “There are some hopeful signs for copper.”
Falling Inventories
The metal has also gained as inventories dropped, Melek said. Stockpiles monitored by the London Metal Exchange fell for a seventh straight session to 522,025 tons. That marked the longest stretch of declines since the end of September.
Most of the drop in stockpiles this week occurred at warehouses in Asia, which suggests “copper is heading to China,” analysts at RBS Global Banking & Markets, led by Nick Moore in London, said today in a report.
“We believe copper’s rally still has legs,” the RBS analysts said.
The metal will average $1.60 a pound this year, RBS forecasts. That was up from the average of $1.52 this year.
“As we move into the third and fourth quarter, we could start to see some growth in copper demand,” Melek of BMO said. “I’m not suggesting the economy will rebound massively, but it will start bottoming out and coming back. That’s going to help copper, and the market is moving in anticipation of this. It’s all about expectations.”
On the LME, copper for delivery in three months advanced $35, or 0.9 percent, to $3,720 a ton ($1.69 a pound). The price reached a record $8,940 on July 2.
