By Anna Stablum Sept. 20 (Bloomberg) -- Copper rose in London to the highest price in almost five months as a weaker dollar fueled demand for industrial metals as an alternative investment and inventories of metal shrank further. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.4 percent, making dollar-priced metals cheaper in terms of other monies. Stockpiles of copper tracked by the London Metal Exchange slid after declining for a 30th week in a row last week. “Ample liquidity, a weaker dollar, a stronger yuan and robust demand from China” are supporting prices of industrial metals, said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. He predicted “further upward moves.” Copper for delivery in three months rose $63, or 0.8 percent, to $7,783 a metric ton at 9:56 a.m. on the LME. The contract touched $7,812, the highest price since April 26. Among other main LME metals, tin advanced for a 10th day. Cash copper’s discount to the three-month contract shrank to $9 a ton on Sept. 17, the narrowest intraday level since Sept. 14, 2009. The so-called contango was at $10.75 in the prior session, according to the latest LME data. “With this move being led by spot prices pushing higher, it certainly looks bullish,” said Nic Brown, an analyst at Natixis Commodity Markets Ltd. in London. The shift toward a so- called backwardation, when cash metal trades at a premium to the three-month contract, “reflects growing concerns about scarcity of physical metal,” he said. Fed Policy Copper for delivery in December gained 0.5 percent to $3.5395 a pound on the Comex in New York. The dollar slid on speculation the Federal Reserve will say tomorrow it’s considering further measures to keep borrowing costs low. Policy makers are likely to affirm the central bank’s pledge to keep interest rates low for an “extended period” and maintain the floor on its holdings of securities, according to economists surveyed by Bloomberg. A report today may signal that the housing market remains poor in the U.S., the world’s second-biggest copper consumer after China. The National Association of Home Builders/Wells Fargo confidence index was probably at 14 this month, from 13 in August, according to a Bloomberg News survey. The figures are due at 3 p.m. in London. Readings below 50 indicate that a majority of respondents said conditions were poor. Construction accounts for a quarter of copper demand, according to the Copper Development Association. Inventories Contract Financial markets in China, the world’s largest metals user, are closed from today to Sept. 24 for the Mid-Autumn festival holiday. LME copper stockpiles fell 0.4 percent to 382,500 tons, daily exchange figures show. Orders to draw copper from inventories, or canceled warrants, fell 2.8 percent to 28,950 tons. Two parties each held between 30 percent and 39 percent of the stockpiled metal as of Sept. 15. Tin for three-month delivery on the LME gained 0.4 percent to $23,700 a ton after touching $23,800, the highest intraday price since July 16, 2008, on Sept. 17. The metal is this year’s best LME performer, adding 40 percent, compared with the 26 percent advance by closest rival nickel. Tin, which touched a record $25,500 a ton in May 2008, has been bolstered by disruptions to production in the Democratic Republic of Congo and Indonesia. Shipments from Indonesia, the largest exporter, may drop 19 percent this year, according to the trade ministry. Discount Narrows Exports may plunge to about 80,000 tons in 2010 as heavy rains disrupt mining, said Alberth Tubogu, export director for mining and industry products at the ministry. LME tin stockpiles rose 0.2 percent to 13,655 tons, paring this year’s decline to 49 percent. All of the inventory was available on Sept. 15, after one party held between 40 percent and 49 percent in the prior session, according to the latest exchange data. Cash tin’s discount to the three-month contract shrank to $9 a ton as of Sept. 17 from $36 a week earlier, according to LME data. Nickel rose 0.9 percent to $23,400 a ton after reaching $23,570, the highest intraday price since May 10, in the prior session. The market moved into a so-called backwardation for the first time in more than a year on Sept. 14 as immediate-delivery nickel traded at a premium to three-month metal. Cash nickel was at a premium of $13 a ton to the three- month contract on Sept. 17, widening from $7 in the prior session, according to the latest LME figures. Cash metal was at a discount of $6 on Sept. 13. Aluminum advanced 1.6 percent to $2,214 a ton, lead climbed 1 percent to $2,224 a ton and zinc jumped 2.1 percent to $2,195 a ton. To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

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