Copper may rise for a second day in London as an unexpected gain in European industrial production and lower inventories of the metal in China signal steady demand. Output in the euro area advanced 0.2 percent on the month in April, European Union statistics showed today. Economists surveyed by Bloomberg News had forecast a drop of 0.2 percent. Copper stockpiles in China, the world’s biggest user of the metal, may have halved over the past two months as users drew down reserves in bonded and exchange-monitored warehouses. “Underlying demand coming out of China looks good,” said Nic Brown, an analyst at Natixis Commodity Markets Ltd. in London. “Demand for copper hasn’t gone away. We are broadly positive.” Copper for three-month delivery rose $6, or 0.1 percent, to $9,175 a metric ton by 11:58 a.m. on the London Metal Exchange. Prices advanced as much as 0.5 percent after gaining the most since May 18 yesterday. September-delivery copper was little changed at $4.175 a pound on the Comex in New York. Inventories in Chinese bonded warehouses, which are undisclosed, may have dropped to about 300,000 tons, according to estimates from traders and analysts in the country including Shanghai East Asia Futures Co. Stocks tracked by the LME fell for a third day, dropping 1,050 tons to 472,625 tons, daily exchange figures showed. Inflation in China Copper gained yesterday as a report showed industrial production in China advanced 13.3 percent from a year earlier in May, little changed from the prior month. Still, the Chinese central bank yesterday increased lenders’ reserve requirements to a record after growth in consumer prices sped up to the fastest pace in almost three years. “Monetary tightening remains a concern,” Natixis’ Brown said. “The high levels of inflation remain a concern.” Chinese inflation climbed to 5.5 percent in May, figures showed yesterday. It has topped the government’s 4 percent target each month this year. Inflation may reach 6 percent this month, according to banks from Societe Generale SA to UBS AG, prompting speculation interest rates might rise further after four increases since September. Borrowing costs may climb “in weeks, if not days,” according to an unsigned editorial in the China Daily today. India’s central bank will boost interest rates a further 0.75 percentage point by the end of the year, including a quarter-point increase tomorrow, Goldman Sachs Group Inc. analysts Vishal Vaibhaw and Tushar Poddar wrote in a report dated yesterday. Zinc for three-month delivery on the LME fell 0.5 percent to $2,268.75 a ton and lead declined 0.3 percent to $2,572 a ton. Tin dropped 0.2 percent to $25,600 a ton, aluminum fell 0.2 percent to $2,622 a ton and nickel gained 0.2 percent to $22,350 a ton. To contact the reporter on this story: Agnieszka Troszkiewicz in London at atroszkiewic@bloomberg.net To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Source