Copper Soars to More Than $5,000 in London on Supply Shortfall
Feb. 3 (Bloomberg) -- Copper opened above $5,000 a metric ton for the first time in London as concern that mining disruptions and rising demand will worsen a supply shortfall fueled buying by investors. Zinc and lead also rose to records.
Rio Tinto Group, the world's third-largest mining company, plans a temporary shutdown of a plant at its Kennecott Utah copper project in the third quarter, it said today. Manufacturing in the euro zone grew for a seventh month in January, according to data released Feb. 1 by NTC Research Ltd. That gain is helping to attract investors to copper, which is used in wiring and plumbing, said Adam Rowley, an analyst in London at Macquarie Bank.
``There are definitely signs that consumer demand has been picking up,'' Rowley said in an interview today. ``Funds are buying heavily.''
Copper for delivery in three months on the LME traded as high as $5,050 a ton, 67 percent higher than a year ago. The metal, used for wiring and plumbing, was $11.50, or 0.2 percent, higher at $5,005 a ton as of 10:37 a.m. local time.
The global copper deficit will be 147,000 tons in 2006, Morgan Stanley said last month. The shutdown at Kennecott Utah will last for as long as 50 days, London-based Rio Tinto said in a video presentation to investors in Australia.
The shortfall is leading some analysts to forecast prices will rise further. Copper may reach $8,000 a ton in the next two years, analysts at Credit Suisse said in November.
Fund investments in commodities such as copper will soar almost 50 percent to $120 billion this year, Standard Bank in London said in a report yesterday.
Cash Influx
``With this cash influx, the market has become something of a self-fulfilling prophecy,'' said Standard Bank, which trades metals on the LME. ``As new money enters, it takes prices higher, attracting further money to capitalize on the returns.''
Zinc fell $4 or 0.2 percent, to $2,379 a ton. Earlier the metal traded as high as $2,397, beating the record set yesterday by $7.
Zinc demand this year is also forecast to exceed production. Canadian miner Teck Cominco Ltd. said yesterday zinc output at its jointly owned Antamina mine in Peru may fall 30 percent this year due to changes in ore mix and grades.
Nick Hatch, an analyst at Investec Securities in London, estimates zinc use will exceed global output this year by 310,000 metric tons. Demand for the metal, mostly used to protect steel from corrosion is rising in China, the world's largest consumer.
``We believe this a long-term event, and potentially could last for a decade,'' Greig Gailey, Chief Executive Officer of Australian zinc miner Zinifex Ltd., said in a television interview today. ``It's a fundamental change in the demand for metals.''
Lead rose $13, or 0.9 percent, to $1,428 a ton and traded as high as $1,435, exceeding the record set yesterday by $5. Nickel was $50 lower at $15,150 a ton. Tin dropped $25 to $7,875.
To contact the reporter on this story:
Simon Casey in London at scasey4@bloomberg.net
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