BLBG: Copper Rises to Five-Month High as Inventories Head for 31st Weekly Drop
Copper climbed to a five-month high in New York as stockpiles of metal headed for a 31st weekly drop in a row, signaling steady demand.
London Metal Exchange copper inventories declined to near the lowest level since November, and cash metal’s discount to the three-month contract shrank. Figures due today may show a gain in sales of existing homes in the U.S., the world’s second- largest copper user after China.
“Continued stock drawdowns mean the market is looking very tight,” Gayle Berry, an analyst at Barclays Capital, said today by phone from London. “Demand is very robust,” and prices may continue to climb, she said.
Copper for delivery in December rose as high $3.594 a pound, the highest price since April 16, on the Comex in New York. The metal was up 1.65 cents, or 0.5 percent, at $3.5815 at 7:53 a.m. local time. Copper for delivery in three months added 0.4 percent to $7,877 a metric ton on the LME. All six main metals traded on the LME gained, led by zinc.
Home resales rose to a 4.1 million annual pace in August from July’s 3.83 million, according to the median of 72 estimates in a Bloomberg News survey. The figures are due at 10 a.m. New York time. Construction accounts for a quarter of copper demand, according to the Copper Development Association.
Fed Rate Target
Prices gained even as the dollar rebounded from a five- month low against the euro. The U.S. currency weakened this week after the Federal Reserve left its benchmark interest-rate target at a record low, pledged to take more steps to spur growth if necessary and said inflation “is likely to remain subdued for some time.”
Until U.S. interest rates start to “edge up, investors will continue loading up on dollar-denominated assets,” said Geoff Clear, head of Asia commodities at Australia & New Zealand Banking Group Ltd.
LME copper stockpiles fell 0.5 percent to 380,125 tons, daily exchange figures showed, leaving inventories down 1.1 percent this week. Stocks climbed yesterday for the first time in six days after dropping on Sept. 21 to the lowest level since November. Orders to draw copper from inventories, or canceled warrants, slid 6.8 percent to 26,750 tons today.
Two parties held between 30 percent and 39 percent of the stockpiled metal as of Sept. 21.
‘Increased Demand’
Cash copper’s discount to the three-month contract shrank to $4.25 a ton today. The so-called contango was at $7.50 yesterday and $11.50 on Sept. 21, according to LME data.
“The fact that we’re beginning to see nearby spreads tighten is reflecting that there is increased demand for spot material,” Barclays’ Berry said. “It’s only a matter of time before we see this flipping into backwardation,” when immediate-delivery metal trades above the three-month price.
Among other LME metals for three-month delivery, tin added 1.3 percent to $23,600 a ton. The metal is this year’s best LME performer, adding 39 percent, compared with the 23 percent advance by closest rival nickel.
Aluminum gained 1.5 percent to $2,268 a ton after touching $2,276.50, the highest price since April 27. Zinc climbed 2.1 percent to $2,237.25 a ton after reaching $2,245, the highest price since May 4. Nickel rose 0.7 percent to $22,721 a ton and lead was 1.1 percent higher at $2,247 a ton.
To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Glenys Sim in Singapore at gsim4@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
