Copper Gains in London on Rising Equities, Falling Stockpiles
By Anna Stablum
May 19 (Bloomberg) -- Copper advanced for a fourth day in London, the longest winning streak in a month, on gains by equity markets and a further drop in stockpiles.
The MSCI World Index of shares rose for a second day, adding as much as 1.4 percent. Copper inventories in warehouses monitored by the London Metal Exchange fell for a ninth day. The metal pared advances after a report showed that U.S. housing starts unexpectedly fell last month, casting doubt on optimism about a rebound in construction and demand for copper.
“The metals may struggle to hold on to earlier gains,” said David Thurtell, an analyst at Citigroup Inc. in London, citing the U.S. figures.
Copper for three-month delivery rose $50, or 1.1 percent, to $4,570 a ton at 2:14 p.m. on the LME. The contract advanced as much as 3.4 percent earlier. The metal for July delivery added 0.5 percent to $2.0830 a pound on the New York Mercantile Exchange’s Comex division.
Housing starts slid 13 percent in April and building permits, a sign of future construction, also dropped. Both were expected to rise, according to economists surveyed by Bloomberg. Copper climbed earlier today after yesterday’s news that the National Association of Home Builders/Wells Fargo index of builder confidence rose to its highest since September.
Construction Demand
The construction industry uses a quarter of all copper produced, according to the Copper Development Association.
Stockpiles of the metal in LME-monitored warehouses fell 1.3 percent to 348,825 tons, for a 14 percent decline in May.
Prices also were helped by a weaker dollar, making metals cheaper for holders of other currencies, Andrey Kryuchenkov, an analyst at VTB Capital in London, said by phone. The U.S. Dollar Index, which tracks the currency against the euro and five other monies, fell as much as 0.8 percent.
Copper has gained 3.1 percent in May on the LME, advancing for a fifth straight month on restocking by China, the world’s largest consumer. The country’s government increased subsidies for encouraging consumers to replace older vehicles with newer models to 5 billion yuan ($733 million) from 1 billion yuan, a statement posted on the State Council’s Web site shows.
“The impact of the China-led rally has largely played out,” Goldman Sachs Group Inc. analysts led by Janet Kong said in a report dated yesterday. Metals fundamentals remain fragile, with demand weak outside China, Goldman Sachs said, though it’s still “constructive on the base metal sector” in the “medium to longer term.”
Aluminum Outlook
The bank forecast an economic recovery in China starting in the current quarter and the beginning of a global rebound in the second half of 2009. Copper remains its most-favored metal, the report shows.
Aluminum for three-month delivery fell 0.5 percent to $1,512.50 a ton. LME-monitored inventories of the lightweight metal, used in industries from packaging to aerospace, rose 3 percent today to a record 4.06 million tons.
The metal is still Goldman Sachs’s least-favored, according to the report. Aluminum is likely to see the strongest supply response as smelters restart idle capacity, which would cap any price advances, the bank said.
United Co. Rusal, Russia’s largest aluminum producer, expects inventories to increase until the third quarter, Artem Volynets, the company’s head of strategy, said today. Still, there are some signs of improvement in the market, particularly in China, he said.
Lead rose 0.7 percent to $1,500 a ton, and zinc gained 0.8 percent to $1,529.75 a ton. Nickel advanced 1.2 percent to $12,500 a ton, and tin rose 0.7 percent to $13,750 a ton.
