Copper Soars on Bets Government Spending Will Revive Metal Use
2009-02-06 17:27:24.407 GMT
By Millie Munshi
Feb. 6 (Bloomberg) -- Copper prices jumped the most in almost two weeks on speculation that government spending plans worldwide will revive growth and boost demand for the metal.
Urged on by President Barack Obama, the U.S. Senate may vote as soon as today on an economic stimulus package valued at more than $900 billion. China, the world’s biggest copper user, started investing the second allocation of funds from its 4 trillion yuan ($585 billion) stimulus plan, Xinhua News Agency said on Feb. 3. Before today, copper rose 2.1 percent this week.
“Metals may be discounting an imminent passage of the stimulus bill by the Senate,” Edward Meir, a Darien, Connecticut-based MF Global Ltd. analyst, said today in a report. “Perceptions are jelling that copper imports will remain strong” this month in China as government spending rises, he said.
Copper futures for March delivery soared 11.35 cents, or
7.6 percent, to $1.6135 a pound at 12:22 p.m. on the New York Mercantile Exchange’s Comex division. A close at that price would be the biggest gain for a most-active contract since Jan.
26. The price earlier touched $1.617, the highest since Jan. 27.
“People are excited about the stimulus plan” and that’s helping copper prices, said Patrick Chidley, an analyst at Barnard Jacobs Mellet in Stamford, Connecticut.
China’s economic plan will boost copper demand 6.2 percent this year, and spending in the U.S. will increase use of the metal by 4.1 percent, BNP Paribas SA forecast.
Manufacturing Stabilizing
Copper also climbed this week on speculation that manufacturing may be stabilizing. China’s Purchasing Manager’s Index rose in January from the previous month, a report showed this week. A gauge of U.S. manufacturing also advanced last month from December, the Institute for Supply Management said on Feb. 4.
“This week’s sharp rally in copper prices is in part explained by increased optimism over the condition of Chinese industrial demand,” analysts at Deutsche Bank AG including Joel Crane in New York said today in a report.
Still, the gains may not be sustainable as traders are buying the metal on “overly ambitious demand expectations,”
Deutsche Bank said.
The U.S. unemployment rate climbed to 7.6 percent last month, the highest since September 1992, the Labor Department said today. Non-farm payrolls shrank by 598,000 jobs, the most eliminated in a month since December 1974. Copper plunged 54 percent last year as the global recession slashed consumption.
Deteriorating Demand
“All indicators suggest global demand growth for copper had rapidly deteriorated,” Deutsche Bank said.
The metal will average $1.275 a pound this year as supplies top demand by 920,000 metric tons, the bank estimates. That compares with an average of about $3.12 in 2008.
On the London Metal Exchange, copper for delivery in three months rose $235, or 7.1 percent, to $3,565 a metric ton ($1.62 a pound). Earlier, the price climbed as much as 7.5 percent to the highest since Jan. 27. The price reached a record $8,940 in July. |
