bloomberg.com
Copper Rises on Speculation Output to Lag Behind Demand Growth
By Claudia Carpenter and Chanyaporn Chanjaroen
Oct. 11 (Bloomberg) -- Copper rose in London, snapping a two- day slump, on speculation supplies from mines won't keep up with growing demand, forcing consumers to rely on limited inventories.
Labor strikes slowed output growth this year to a gain of 2.2 percent, compared with 3.4 percent last year, Standard Bank said in a report yesterday. Prices have surged 71 percent in 2006. Inventories monitored by the London Metal Exchange have dropped 15 percent from this year's peak in March, leaving stockpiles at 113,900 metric tons, less than three days of global consumption.
``We see low inventories and strong demand,'' Jose Pablo Arellano, president of Codelco, the world's biggest copper producer, said in an interview in London today. ``That provides the basis for strong prices.''
Copper for delivery in three months gained $95, or 1.3 percent, to $7,525 a metric ton at 4:21 p.m. on the LME. Prices fell 0.4 percent in the previous two days.
Copper futures for December delivery rose 4.95 cents, or 1.5 percent, to $3.4275 a pound on the Comex division of the New York Mercantile Exchange. Prices are up 87 percent from a year ago. A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
Prices in London earlier fell as much as 1.2 percent after workers reached a wage agreement with Codelco's central Chilean unit, Andina, clearing the way for higher output at a time of growing demand. The unit accounts for 14 percent of Codelco's copper production.
`Still Tight'
``We saw some consumer buying on that dip,'' said Roy Carson, a London-based trader at Triland Metals Ltd., one of 11 companies trading on the LME. ``There is underlying support with the market still expected to be tight.''
Codelco is producing less copper this year, partly because of a rockslide at Chuquicamata, its largest mine, in July. Output may drop to ``slightly'' below 1.7 million tons, company president Arellano said. Codelco said in June production would be about 1.71 million tons, down 15,000 tons from 2005.
``Over the next few years, the mining companies are going to produce an amount of copper that is not sufficient to drive the copper price back down to its traditional levels given the level of demand,'' Brian O'Shaughnessy, chief executive officer of Rome, New York-based Revere Copper Products Inc. said in an interview in London today. |
