Copper Reaches Record in London; China Stockpiles May Dwindle
2005-04-11 06:52 (New York)
By Chanyaporn Chanjaroen
April 11 (Bloomberg) -- Copper futures reached a record on
the London Metal Exchange on speculation demand will outstrip
supply in China, the world's largest consumer.
Copper for delivery in three months climbed to $3,316 a
metric ton, the highest since the contract began trading in its
current form in 1986 and $8 more than the March 31 peak. The metal
was up $23, or 0.7 percent, to $3,310 at 11:26 a.m. London time.
``It reflects continued tight supply situation in Asia,''
John Meyer, an analyst at Numis Corp., said in a telephone
interview. ``In Europe, consumers have also been forced to return
to the market after delaying purchasing.''
China's State Reserve Bureau, which regulates the country's
metals supplies, may buy 10,000 tons when this month's contract
expires on April 15, said Hu Jiangxue, an analyst at Shanghai
Oriental Futures Co. Copper at seven warehouses registered in
Shanghai jumped 36 percent to 22,157 tons as of last week.
``It's still a relatively small amount,'' Meyer said. Copper
for June gained as much as 750 yuan, or 2.3 percent, to a record
33,160 yuan ($4,006) a ton today on the Shanghai Futures Exchange.
The contract settled at 32,870 yuan.
``With a large short position held by Chinese speculators,
there is a large risk for a further push higher in prices'' as
investors seek to cover bets that prices will fall, Ingrid
Sternby, an analyst at Barclays Capital in London, said in an e-
mailed report.
Copper stockpiles monitored by the LME rose 4 percent to
47,125 tons since the beginning of this month. On a yearly basis,
the stockpiles fell 73 percent. China's $1.6 trillion economy
expanded 9.5 percent in 2004, spurring demand for copper used in
electrical wiring and plumbing pipes.
China Stockpiles
``We understand that the State Reserve Bureau ran down
virtually all of its stock last year, and it has been in the
market taking delivery of metal in recent weeks,'' Adam Rowley and
Jim Lennon, analysts at Macquarie Ltd. in London, said in an e-
mailed report. The buying may delay development of a copper
surplus, they said.
The bureau probably sold between 100,000 and 500,000 tons of
copper in China last year, Thomas Baack, chief statistician of the
International Copper Study Group in Lisbon, said on March 23,
citing estimates from other analysts.
Standard Bank London analyst Robin Bhar forecast last month
that copper production would exceed demand by 86,000 tons in 2006,
following a shortfall of 275,000 tons this year. Morgan Stanley
estimates output will outpace demand by 15,000 tons in 2006 after
three years of deficits.
The Chinese agency's previous buying ``suggests that it may
wait for a much lower price before building substantial stocks,''
the Macquarie analysts said.
Fund Bets
Hedge-fund managers and other large speculators increased
long positions, or bets prices will rise, in New York copper
futures in the week ended April 5, the U.S. Commodity Futures
Trading Commission said in a weekly report on April 8.
Speculative long positions outnumbered short positions by
27,527 contracts on the Comex division of the New York Mercantile
Exchange, the Washington-based commission said in its Commitments
of Traders report. The rise in net-long positions was the first
after three consecutive declines.
Producers of copper pipe and wire delayed purchases as prices
surged to a record in March. Darren Goldthorpe, purchasing and
sales manager at Tri-wire Ltd., a U.K.-based maker of electrical
wiring, said customers prefer to pay about 1,600 pounds ($3,022) a
ton, a level last seen in February.
``If prices keep going up, they won't be able to hold off any
longer,'' Goldthorpe said.
The dollar's second day of declines against the euro helped
copper prices, Meyer at Numis Corp said. A weaker dollar makes
dollar-denominated metals cheaper to buy with other currencies.
The euro was up 0.3 percent to $1.2971 against the dollar,
according to the EBS electronic currency-trading system.
Other LME-traded metals also rose. Aluminum was up $17, or
0.9 percent, at $1,963 a ton and nickel gained $150, or 0.9
percent, to $16,250. Lead rose $6, or 0.6 percent, to $974, tin
was up $75, or 0.9 percent, to $8,250 and zinc gained $12, or 0.9
percent, to $1,378.
--Editor: Farr |
