Copper Rises in London as Inventories Decline, Dollar Drops
By Simon Casey
April 22 (Bloomberg) -- Copper rose on the London Metal
Exchange as the dollar pared gains against the euro and supplies
fell amid forecasts demand will outstrip production this year.
The dollar's drop to 0.84193 euros at 12:21 p.m. London
time, after reaching a five-month high yesterday of 0.84250, made
metals more affordable for holders of European Union currency.
U.S. interest rates at a 45-year low of 1 percent have fueled
housing construction, spurring demand from builders for copper
used in plumbing pipes and electrical wiring.
Copper inventories stored in LME-monitored warehouses fell
0.5 percent to 159,575 tons. The total has fallen 80 percent in
the past year as miners failed to keep up with demand and
manufacturers took delivery of metal.
``The underlying fundamentals are still very strong,'' Angus
Macmillan, an analyst at Prudential Bache International in
London.
Copper for delivery in three months rose $14, or 0.5
percent, to $2,728 a ton on the LME. It earlier touched $2,678,
the lowest since Feb. 13. The price plunged 5.9 percent
yesterday, the biggest drop since June 1996, after Federal
Reserve Chairman Alan Greenspan said yesterday U.S. benchmark
interest rates ``must rise'' eventually to prevent inflation,
boosting the dollar.
Copper is up 19 percent this year, following a 48 percent
rally in 2003 amid forecasts for a prolonged production deficit.
This year's shortfall will reach 368,000 tons, or 2.3 percent of
global production, Goldman Sachs Group Inc. has said.
Fund Holdings
Copper holdings by hedge funds and other large investors on
the Comex division of the New York Mercantile Exchange have
fallen 48 percent this year, according to Commodity Futures
Trading Commission data. Short positions have increased,
indicating that more are betting on a drop in prices, which
reached an eight-year high of $3,030 a ton in London on March 1.
``They could very well be back in once they realize that
worldwide growth prospects are still intact,'' Edward Meir, an
analyst at Man Financial Ltd. in London, said in an e-mailed
report.
Nexans SA, the French cable maker and the world's biggest
user of copper, said first-quarter sales rose 11 percent as it
benefited from improved U.S. demand. Higher copper prices swelled
its debt to 73 million euros ($86 million) from 23 million euros
at the end of 2003.
Southern Peru Copper Corp., Peru's biggest copper miner,
said yesterday first-quarter net income surged more than fourfold
to $86.8 million. Phelps Dodge Corp., the world's second-largest
copper miner after Chile's Codelco, and Freeport-McMoRan Copper &
Gold Inc., the New Orleans-based owner of the world's second-
biggest copper mine, have said they plan to boost output.
Aluminum rose $5, or 0.3 percent, to $1,725 a ton. It fell
6.4 percent yesterday, the metal's biggest one-day drop since
July 1988. Two days before, it closed at an 8 1/2-year high
$1,837.
Nickel fell $75, or 0.6 percent, to $12,350 a ton. It
touched $11,800, the lowest since Nov. 21. Lead climbed $9 to
$702, tin gained $150 to $8,400 and zinc increased $6 to $1,023.
--Editor: Farr, King |
