Copper Gains, Raising Speculation It Will Break Year-Old Record
2007-04-17 15:42 (New York)
By Millie Munshi and Chanyaporn Chanjaroen
April 17 (Bloomberg) -- Copper prices rose to the highest
since July in London and reached an eight-month high in New York,
raising speculation that the metal will break records set last
year.
Copper has surged 36 percent in New York and 34 percent in
London in six-week rallies that have been the longest since May.
Prices were bolstered today by fears that a labor dispute in
Indonesia may curb supplies. Metals will remain above ``long-
term'' levels, Cynthia Carroll, chief executive officer of Anglo
American Plc, said today.
``Copper is just going to the moon,'' Ron Goodis, futures
trading director at Equidex Brokerage Group Inc. in Closter, New
Jersey, said today. ``Supplies are tight and demand is strong;
everything looks positive. Nobody in their right mind would want
to get in front of this moving freight train.''
Futures for July delivery gained 13.7 cents, or 3.9 percent,
to $3.679 a pound today on the Comex division of the New York
Mercantile Exchange. That's the highest closing price for the
most-active contract since Sept. 6.
``The trend upward is absolutely amazing,'' said William
O'Neill, a partner at Logic Advisors in Upper Saddle River, New
Jersey. ``Chinese demand is extremely strong, money flow into
base metals from funds continues to be very buoyant and there's
just an atmosphere of optimism.''
In the coming months, prices will test the high of $4.04 a
pound set in New York last year, traders, including Equidex's
Goodis said.
Supply Disruption Concern
The metal today was driven on concern that a labor dispute
at the Grasberg mine in Indonesia, the world's second-biggest
source of the metal, will curb production. Workers at the mine,
owned by Freeport McMorRan Copper & Gold Inc., canceled talks
with the company today and said they will rally tomorrow to
demand higher wages.
``Grasberg is very important and people have not made much
allowance for labor disputes this year,'' said Michael Jansen, a
London-based strategist with JPMorgan Securities Ltd.
Global production of 18.4 million tons this year will exceed
demand by 95,000 tons, HSBC Holdings Plc analysts Paul McTaggart
and Alex James said today in a report.
Copper for delivery in three months on the London Metal
Exchange advanced $319, or 4.1 percent, to $8,049 a ton, the
highest closing price since July 14. It traded earlier at $8,100,
the highest since Sept. 7.
Inventories `Low'
``Stocks of most major metals remain relatively low and
there remain significant constraints within parts of the supply
chain,'' Anglo American's Carroll said today during a
shareholders' meeting in London. She expects global economic
growth will continue to support prices. Anglo is the world's
second-largest mining company.
Demand for the metal in China, the world's largest user, may
rise 10 percent this year, faster than in 2006, as the nation
expands its electricity-generation capacity, London-based metals
consulting CRU said yesterday.
``If you look at the global picture, growth looks extremely
strong and that will mean very strong demand for base metals,''
Logic Advisors' O'Neill said.
The International Monetary Fund forecasts global growth of
4.9 percent this year. The group last week projected the global
economy would withstand a slowdown in the U.S. Copper, which is
used in homes, cars, offices and appliances, often moves in
tandem with economic growth.
Higher prices for the metal ``certainly suggest stronger
economic growth'' in the world, said Jim Wyckoff, senior markets
analyst at TradingEducation.com in Wesley Chapel Florida.
U.S. Housing Report
Stronger-than-expected U.S. housing figures also helped
support prices, said Catherine Virga, an analyst at CPM Group
Inc. in New York.
U.S. housing starts unexpectedly rose for a second month in
March, bolstering expectations that the worst housing slump in 15
years may be easing. Builders broke ground on new homes at an
annual rate of 1.5 million last month, an increase of 0.8 percent
from February, the Commerce Department said today in Washington.
The U.S. is the world's second-largest consumer of copper, and
the housing sector is its biggest user.
``The U.S. economy doesn't look as bearish as it once did,''
Virga said. ``Construction is a large portion of the fuel that is
driving prices.''
Copper stockpiles monitored by the LME declined 1.5 percent
to 172,025 tons, the exchange said today in a daily report, the
lowest since Dec. 13. They have fallen 11 percent in the last
month.
``All of the metals are going to rally,'' said
Matthew Zeman, a metals trader at LaSalle Futures Group in
Chicago. ``The pace of worldwide demand is strong'' and mine
output remains limited, he said.
Tin, Zinc Rising
Tin traded at the highest in 18 years today and zinc rose to
a seven-week high.
Tin gained $475 to $15,000 a ton, the highest since at least
1989. Zinc, used to galvanize steel, rose $220 to $3,720 a ton.
Earlier, Zinc traded at $3,725, the highest since Feb. 26.
Lead increased $10 to $2,015 a ton and nickel advanced
$2,200 to $48,400 a ton. The LME said nickel stockpiles dropped
5.9 percent to 4,020 tons, the largest one-day decline since
April 5, leaving inventories of the metal at the lowest since
March 20.
Aluminum climbed $70.50 to $2,892 a ton.
A futures contract is an obligation to buy or sell a
commodity at a fixed price for delivery by a specific date.
BHP Billiton Ltd., the world's biggest mining company, owns
the Escondida mine in Chile, the world's largest source of the
metal.
--With reporting by Halia Pavliva in New York, Brett Foley in
London, Leony Aurora and Karima Anjani in Jakarta, Xiao Yu in
Beijing and Bob Willis in Washington. Editor: Frank. |
