By Anna Stablum Sept. 6 (Bloomberg) -- Copper rose for a fourth day in London as stockpiles continued to shrink, indicating steady demand for the metal. Inventories tracked by the London Metal Exchange dropped for a second day after last week sliding below 400,000 metric tons for the first time since November. Stocks fell for a 28th week in a row last week, the longest such streak of declines since August 2004, and are down 21 percent this year, on course for the first annual retreat since 2004. “Supply will be under constant pressure to keep up with demand in the years ahead,” Dan Smith, an analyst at Standard Chartered Plc in London, said today in a report. “Mine projects are being delayed due to the recent recession.” Copper for delivery in three months added $36, or 0.5 percent, to $7,682 a ton at 1:47 p.m. on the LME. Copper for delivery in December gained 0.1 percent to $3.502 a pound in electronic trading on the Comex in New York. Investors bought and sold 2,825 LME copper contracts, less than 10 percent of daily volume on Sept. 3. Comex floor trading is closed today for the Labor Day holiday. “Liquidity will likely grind to a halt in early afternoon trade,” said Randy North, a trader at RBC Capital Markets in London. “We’ll probably experience a certain price drift into the close.” Dollar Movement Copper pared a gain of as much as 1.2 percent in London as the U.S. Dollar Index, a six-currency gauge of the greenback’s strength, erased a decline of as much as 0.2 percent. A stronger dollar makes raw materials priced in the currency more expensive in terms of other monies. “The currency is influencing the price at the moment,” North said. LME prices gained for a third week in a row last week, bolstered by optimism about the outlook for the U.S. economy after monthly employment figures exceeded estimates. Copper climbed today as U.K. factory production rose at a record pace in the third quarter, a survey by the Engineering Employers Federation and BDO Stoy Hayward LLP showed. A report tomorrow may show the economic recovery is continuing in Germany, the world’s third-largest copper user after China and the U.S. German factory orders probably rose 0.5 percent in July after gaining 3.2 percent in the previous month, economists said before the Economy Ministry report. Deficit Market? Copper may average $7,850 a ton in the fourth quarter, above a prior forecast of $7,650, Smith said. Standard Chartered raised its estimate for next year’s average to $8,325 from $7,900, he said. Supply will fall short of demand by 273,000 tons next year after a 462,000-ton surplus in 2010, according to the analyst. “We expect the copper market to remain in deficit for the next few years,” he said. LME copper stockpiles dropped 0.2 percent to 396,875 tons, the lowest level since Nov. 10, according to daily exchange figures. Orders to draw copper from LME inventories, or canceled warrants, dropped for a third day, sliding 5.6 percent to 26,100 tons. Nickel for three-month delivery on the LME advanced 2.2 percent to $22,072 a ton after reaching $22,250, the highest price since Aug. 19. Inventories, which fell for six months through July, slid for a second day to 119,886 tons. Stockpiles rose 1 percent last month, below the year-earlier 7.1 percent increase and the 5.6 percent gain in August 2008. “Inventory build in the base-metal space during a seasonally weaker demand month was much lower in comparison with both August 2008 and 2009,” analysts at Macquarie Bank Ltd. led by Jim Lennon said in a report today. Aluminum rose 1.5 percent to $2,178.50 a ton and zinc advanced 1.6 percent to $2,184.75 a ton. Tin added 0.2 percent to $21,250 a ton and lead rose 0.9 percent to $2,187 a ton. To contact the reporter on the story: Anna Stablum in London at astablum@bloomberg.net.

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