Copper Prices Rise as China's Economy Grew More Than Forecast
2006-07-18 09:18 (New York)
By Katy Watson and Chanyaporn Chanjaroen
July 18 (Bloomberg) -- Copper prices rose in London and New
York as the economy of China, the world's largest consumer of
the metal, grew at the fastest pace in more than a decade.
China's economy expanded 11.3 percent in the second
quarter, the nation's statistics agency said today. That beat
the 10.4 percent median forecast of 30 economists surveyed by
Bloomberg News. The growth rate may signal increased appetite
for copper, according to Kevin Norrish at Barclays Capital.
``All the data signal usage of copper in China is pretty
strong,'' said Norrish, a metals analyst at Barclays in London.
``We've seen inventory drawdowns of copper both in metal and
concentrate.''
Copper for delivery in three months gained $150, or 1.9
percent, to $7,890 a metric ton as of 1:50 p.m. on the London
Metal Exchange, after falling 4.2 percent yesterday, the biggest
decline in a month. Copper has gained 80 percent this year and
climbed to a record $8,800 a ton on May 11. Copper futures on
the Comex division of the New York Mercantile Exchange rose
$2.05, or 0.6 percent, to $362 a pound at 9:03 a.m. local time.
Stockpiles of the metal tracked by the LME dropped 1,575
tons, or 1.7 percent, to 92,275 tons, the exchange said today in
a daily report, equal to less than three days of global
consumption.
Rising demand from China and tightening stockpiles will
prevent copper dropping much below $8,000 a ton, Norrish said.
It's ``a pretty good number,'' he said.
China needs copper as its booming economy stokes demand for
metals used in the construction of bridges, factories, power
grids and machines. Demand for the metal will rise 6.8 percent
this year to 3.95 million tons, after 5.7 percent growth last
year, according to China Minmetals Co., the country's biggest
metals trader.
Production Exceeds Demand
Copper production exceeded demand in April by 16,000 tons,
the International Copper Study Group said today in a report.
China's usage of copper dropped 5 percent in the first four
months of the year, the Lisbon-based group said. Its data don't
include inventory at China's State Reserve Bureau, which doesn't
publicize its purchases or sales.
Output may decline amid concern about labor disputes from
North America to Chile. Workers at Teck Cominco Ltd.'s Highland
Valley copper mine in Canada have threatened to stop work from
Oct. 1 and miners at Escondida in Chile, the world's largest
copper mine, may strike next month.
Nickel has risen 91 percent this year, climbing to $26,900
a ton yesterday, the highest since at least 1987. It traded
$150, or 0.6 percent, lower at $25.60 a ton.
`Extremely Tight'
``Nickel supply and demand is extremely tight,'' Peter
Harold, managing director of nickel miner Sally Malay Mining
Ltd., said yesterday from Perth, Australia. ``Now you have this
enormous surge in China for stainless steel, which is the major
use of nickel.''
Demand for nickel will exceed production by 34,000 tons
this year, Macquarie Bank Ltd. said in a report yesterday.
Nickel stockpiles monitored by the LME jumped 456 tons, or
7.1 percent, to 6,918 tons, the LME said today. It was the
largest gain since Dec. 17, 2005. Inventory is still at the
lowest since July 25, 2005.
The increase in stockpiles reflect the higher price for
nickel for immediate delivery than for delivery in three months,
Robin Bhar, an analyst at UBS Ltd. in London, said in a report
today. Holders of nickel stocks are attracted by higher prices
of so-called nearby contracts, selling the metal on the LME,
said Bhar, who expects more nickel sales on the LME.
Nickel for immediate delivery is $2,700 a ton more
expensive than metal for delivery in three months, the largest
price difference since August 1994, reflecting a shortage. In a
market with adequate supply, prices of longer-dated delivery
times are higher than nearby ones, reflecting storage and
interest costs.
Among other LME metals, aluminum gained $5 to $2,575 a ton
and zinc added $40 to $3,315. Lead dropped $8 to $1,082 and tin
was $50 lower at $8,300.
--With reporting by Susan Li in Hong Kong and Tan Hwee Ann in
Melbourne. Editor: Casey (jwc/dje).
Denis Gartman commented today on freight rates going up, which means strength in the world economy. This will mean strength in base metal prices, you should be buying this weakness folks. |
