Copper, Lead, Zinc Rise to Records on Higher Chinese Demand
2006-01-25 12:14 (New York)
By Julie Tay and Chanyaporn Chanjaroen
Jan. 25 (Bloomberg) -- Copper, zinc and lead rose to records
in London on speculation a booming economy in China, the world's
largest metals consumer, will boost demand for commodities.
Copper, used in electrical wires, has risen 56 percent in
the past year. Zinc used in stainless steel is up 78 percent.
China overtook the U.K. as the world's fourth-largest economy
last year, according to a report from the country's statistics
bureau today, fueling a four-year commodity rally as the country
puts up buildings and power lines.
``They are all reacting to the same positive sort of
sentiment,'' Paul Merrick, vice president of foreign exchange
and commodities at RBC Capital Markets in London, said in a
phone interview today. Demand will outpace supplies, presenting
``problems across base metals for the next one to two years.''
Copper for delivery in three months rose $126, or 2.7
percent, to $4,773 a metric ton at 4:06 p.m. on the London Metal
Exchange and reached a record $4,780. Copper futures for
delivery in March gained 1.9 percent, or 4.14 cents, to $2.194
per pound on the Comex section of the New York Mercantile
Exchange.
Lead, the biggest gainer on the LME today, gained $61, or
4.6 percent, to a record $1,400 a ton. Zinc traded 2.5 percent
higher at $2,285 after earlier increasing to a record $2,305.30.
Aluminum, nickel and tin also gained today.
Rising prices are fueling profit for the biggest miners
such as Rio Tinto Group and BHP Billiton, while prompting metals
companies to charge users more for the products used in
buildings and utilities. Sales of previously owned U.S. homes
fell more than forecast last month to the lowest since March
2004, adding to evidence of the end of a five-year housing boom.
Copper Inventory
Copper inventory monitored by the London Metal Exchange
dropped 4.7 percent over four straight days to 101,500 metric
tons. Zinc stockpiles, which have fallen 40 percent this,
declined 0.5 percent, according to exchange data today.
``China's dependence on metals imports will continue to
grow,'' Michael Lewis, head global head of commodities at
Deutsche Bank AG in London, said today in a phone interview.
Returns from metals and energy outpaced equities last year,
with the Reuters Jefferies CRB Index, which tracks 19 commodity
futures, gaining 17 percent, compared with a 3 percent increase
in the Standard & Poor's 500 Index of U.S. companies. Zinc
jumped 53 percent last year, and copper rose almost 40 percent.
The CRB is up 3.9 percent this month and reached a record
347.82 two days ago.
Zinifex
Prices probably will keep rising in the next two to three
years because supply isn't expanding fast enough to meet demand
from China, said Greig Gailey, chief executive officer of
Zinifex Ltd., the world's second-largest zinc producer.
``It's difficult to see new mines coming in the next two to
three years'' that are needed to meet rising demand, Gailey said
in an interview from Davos, Switzerland, where he is attending
the World Economic Forum. He declined to give a price forecast.
China's zinc consumption is expanding because of demand
from steelmakers, who use the dark-gray metal to make steel rust
proof. Chinese steel production rose 25 percent to a record last
year, making it the world's biggest steelmaking nation.
The average price of zinc will be 21 percent higher than
last year, beating all other LME-traded metals for a second
consecutive year, according to a Bloomberg News survey. The
metal will rise to an average of $1,666 a ton this year, the
survey showed. Citigroup Inc. today raised its price forecasts
for copper, zinc and aluminum.
Peru Strike
A strike by more than 750 workers at Peru's largest zinc
and lead producer Volcan Cia. Minera SA's Andaychagua, San
Cristobal and Yauli mines began Jan. 18. The protest has fueled
speculation of a wider production shortfall this year than
analysts expected.
The strike will end tomorrow, Reuters reported yesterday,
citing Luis Castillo, head of Peru's Mining Federation.
Copper, the second-biggest gainer on the LME last year, has
seen four consecutive years of supply shortfalls as miners
haven't been able to beat demand from power cable and wire
manufacturers. China accounts for nearly a quarter of global
demand.
Copper may gain to an average of $2 a pound ($4,409.20)
this year, up from $1.66 last year as the metal's inventories
remain low, according to Alain William, a Paris-based analyst at
ING Wholesale Banking.
Chinese processors, including cable makers, are buying
copper to keep plants running during the Lunar New Year because
Chinese markets are closed from Jan. 30 to Feb. 3.
Among other metals for delivery in three months traded on
the LME, aluminum rose $32, or 1.3 percent, to $2,481 a ton.
Nickel gained $155, or 1 percent, to $15,030 and tin rose 1.6
percent, to $7,475 a ton.
--Editor: Stroth, (jwc). |
