Bloomberg on zinc and copper
Zinc Rises to Record, Copper Rallies on Improved Demand Outlook
March 17 (Bloomberg) -- Zinc rose to a record and copper headed for its biggest weekly gain since January on speculation that demand for metals will improve as the U.S. slows the pace of increases in borrowing costs.
Metals are resuming rallies that stalled last month on concern rising interest rates would limit economic growth and raw-material demand. Zinc is up 80 percent in the past year, and copper gained 55 percent. The U.S. yesterday said consumer prices rose at a slower pace in February, suggesting the Federal Reserve by mid-year may halt increases in its key interest rate.
``There's a speculation that Fed will stop tightening,'' Mario Innecco, a futures broker at Man Financial Ltd. in London, said today by telephone. ``There will be more liquidity and money will flow to tangible goods like commodities.''
Zinc for delivery in three months jumped $95, or 4 percent, to a record $2,465 a metric ton at 2:47 p.m. on the London Metal Exchange. The metal, used as a corrosion-resistant coating for steel, has gained 29 percent this year, the biggest gain of the six metals traded on the LME.
Copper, used in wiring and pipes, rose $140, or 2.8 percent, to $5,064 a ton on the LME. A close at that price would cap a 5 percent gain for the week, the biggest since Jan. 27. Copper touched a record $5,100 on Feb. 7.
On the Comex division of the New York Board of Trade, copper for May delivery rose 5.65 cents, or 2.5 percent, to $2.322 a pound at 9:49 a.m. A futures contract is an obligation to buy or sell a commodity at set price by a specific date.
Economic Growth
Industrial metals have soared in the past three years partly as China's booming economy stokes demand for the raw materials needed for factories, cars and appliances. Copper alone has tripled over that period as demand outpaced production. China's economy expanded 9.9 percent last year.
A prolonged period of low interest rates may help preserve rising demand for metals, analysts said. Bank of Japan Governor Toshihiko Fukui said yesterday it's too soon to say when interest rates will be raised from near zero, playing down expectations the bank is preparing an increase.
``We're going to have a significant amount of restocking'' after consumers tapped inventories last year, Peter Hickson, London-based global strategist for base materials at UBS AG, said today in an interview. ``That's going to keep prices higher.''
Use of zinc will exceed output for a third consecutive year in 2006, according to Michael Lewis, head of commodities research at Deutsche Bank AG in London. The shortfall for the metal will be 210,000 metric tons this year, he said.
Zinc Demand
Zinc consumption by China, the world's largest user of the metal, is expanding because of demand from steelmakers. Chinese steel production climbed 25 percent to a record last year, making it the world's biggest steelmaking nation.
China was a net importer of zinc for the first time in 2005, buying 620,816 tons from international producers. That's equal to about 6 percent of world demand, forecast this year at 10.7 million tons by Goldman Sachs Group Inc.
Zinc for immediate delivery moved higher than three-month futures by $10, the first time so-called cash prices have exceeded futures since January 2005. The move indicates supply is tightening, prompting buyers to pay more to ensure prompt delivery. In a well-supplied market, prices for future delivery are usually higher, reflecting costs of storage and interest.
Global copper demand will grow 5.9 percent in 2006 to 17.8 million tons, beating production for a fourth consecutive year, consultant Bloomsbury Minerals Economics Ltd. said on Feb. 20.
Copper Production
Producers including BHP Billiton, the world's largest mining company, are boosting copper output as prices and demand increase. Chile, the world's largest producer of the metal and home to the BHP-controlled Escondida mine, will produce 26 percent more metal by 2012, state-owned copper statistics agency Cochilco said last month.
Stockpiles of copper monitored by the London exchange declined 1.4 percent today, their biggest drop since Feb. 2, to 131,450 tons, the exchange said, equivalent to less than three days of global consumption.
Inventory with ``canceled warrants,'' which indicate metal that may be taken out of storage, fell 75 tons to 17,275 tons, still the highest since Sept. 30.
Among other metals for delivery in three months on the LME, aluminum rose $40, or 1.6 percent, to $2,510 a ton. Nickel climbed $75, or 0.5 percent, to $14,875 a ton; lead advanced $30 to $1,190 a ton; and tin was $75 higher at $7,975 a ton.
To contact the reporter on this story:
Chanyaporn Chanjaroen in London at
cchanjaroen@@bloomberg.net.
Last Updated: March 17, 2006 09:52 EST
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