Copper Rises on Mounting Concern Over Production Cutbacks
London, March 6 (Bloomberg) -- Copper rose for a fifth day
and aluminum advanced on investors' concern that rising U.S.
energy costs may cause metal producers to slash supplies further,
forcing manufacturers to drain inventories.
Copper stockpiles are dwindling at a time when the world's
No. 2 copper miner, Phelps Dodge Corp., is considering cutting
production in the U.S. because of higher energy prices. Aluminum
smelters in the Pacific Northwest have already idled two-thirds of
their capacity.
``The fundamental picture (for the metals) is improving,''
said Robin Bhar, an analyst at Standard Bank. ``Supply is tight,
and the market is in a deficit.''
Copper for delivery in three months rose as much as $11.50,
or 0.6 percent, to $1,834 a metric ton on the London Metal
Exchange, while aluminum gained as much as $13, or 0.8 percent, to
$1,591 a ton.
On the New York Mercantile Exchange, May copper rose as much
as 1 cent, or 1.2 percent, to 84.8 cents a pound.
On March 25, Phelps Dodge may dismiss 2,350 employees at
mines in Arizona and New Mexico, workers that management has
already told of the possibility. The move would come after Chile,
the world's top source of the metal, reported copper production
fell 0.9 percent in January from the same period of 2000.
Copper stockpiles in warehouses monitored by London Metal
Exchange fell 55 percent last year and a further 9.2 percent this
year to their lowest level since September 1998.
``Copper stocks are coming down, and there's not much
capacity on line,'' said Ted Arnold, an analyst at Prudential
Bache. Investors are buying metal in a bet that prices will rise
further, he said.
Outlook
Phelps Dodge's cut would mean that demand outpaces production
by 150,000 tons, rather than the 80,000 tons now expected, said
Kevin Norrish, a minerals economist at Barclays Capital.
Meanwhile, production of aluminum may lag demand by more than
350,000 tons, he said.
``Aluminum is tracking copper and given the tightening supply
side has the better potential of the two,'' said Rhona O'Connell,
a metals analyst at Canaccord Capital.
Last year, global aluminum production lagged demand by 54,000
tons, while copper fell short by 252,000 tons, according to the
company.
Alcoa Inc., Kaiser Aluminum Corp. and others fully or
partially shut 10 factories since July. Aluminum has gained 6
percent over the past four months.
Aluminum inventories as monitored by the LME rose 0.4 percent
to 475,425 tons today. Even so, they are recovering from around
300,000 tons in December, the lowest level in a decade.
The price rally may fail when copper reaches $1,840 a ton and
aluminum rises to $1,590 a ton, analysts said. Ultimately,
prospects for the two depend on whether U.S. economy recovers,
driving demand for industrial metals, analysts said.
The U.S. National Association of Purchasing Management's
factory index rose to 41.9 last month from 41.2 in January,
breaking a string of 11 consecutive declines, suggesting a slump
in factory production may have reached bottom.
--Vladimir Todres in the London newsroom (44 20) 7673 2347, or
vtodres@bloomberg.net/tc |
