Copper Heads for Year's Biggest Weekly Gain as Economy Grows
2005-05-26 13:59 (New York)
By Claudia Carpenter
May 26 (Bloomberg) -- Copper prices rose in New York,
heading for their biggest weekly gain of the year, on signs of
sustained economic growth in the U.S., the world's second-biggest
consumer of the metal.
Copper, which is used in homes, cars, appliances and phone
cables, has climbed 9 percent from a four-month low on May 16,
largely because of economic growth in the U.S. and China, the
biggest user of the metal. The Commerce Department said today the
U.S. expanded at a 3.5 percent annual pace in the first quarter,
up from last month's estimate of 3.1 percent.
``I haven't felt this bullish in three weeks,'' said Sandy
Baker, a partner and senior copper trader at Millennium Futures
in New York.
Copper futures for July delivery rose 3 cents, or 2.1
percent, to $1.4495 a pound on the Comex division of the New York
Mercantile Exchange, the highest closing price since May 10.
Prices are up 5.4 percent this week, heading for the biggest
weekly gain since Dec. 17.
The 18 percent gain in copper in the past year is part of a
surge in commodity prices that reached a 24-year high in March,
led by gains in everything from coffee to sugar to crude oil. The
Reuters-CRB index of 17 commodities rose 0.94 to 300.18 at 1:56
p.m. in New York, heading for its first weekly gain in a month.
The index is up 7.1 percent this year, and reached a high of
323.33 on March 16.
U.S. economic growth at 3.5 percent is ``very positive for
copper usage'' in everything from new homes to machinery, said
Jim Steel, director of commodity research at Refco LLC in New
York.
Homebuilder Rally
Homebuilders including Toll Brothers Inc. led an advance in
U.S. stocks today. Low interest rates, which reduce the cost of
loans, have helped boost U.S. construction, which accounts for 40
percent of copper use. U.S. home building rose 11 percent in
March. A typical home has about 400 pounds of copper, according
to the Copper Development Association in New York.
Shares of Phoenix-based Phelps Dodge Corp., the world's
second-biggest copper producer, gained $1.22, or 1.4 percent, to
$86.44 in New York Stock Exchange composite trading.
If copper futures stay above $1.40, hedge funds will start
buying more futures, and the market is ``off to the races,''
Millennium's Baker said. ``If not, we'll probably head back to
$1.35.'' Copper reached a 16-year high of $1.536 on April 12.
Large speculators that own at least 100 copper futures
contracts, valued at about $3.6 million, reduced their holdings
to the lowest since June last year, government figures show.
Inventories Fall
Supplies of copper monitored by the London Metal Exchange
fell 5.7 percent today, the 11th straight decline. The 48,400
metric tons in global warehouses is the lowest since April 6,
exchange figures show. Stockpiles are down 66 percent in the past
year and on Jan. 21 fell to 43,475 tons, the lowest since May
1988.
The declines have signaled mining companies can't keep up
with growing industrial demand. Protests forced BHP Billiton Ltd.
to shut its Tintaya copper mine on May 24. The mine accounts for
about 0.8 percent of global output.
``New York speculators are buying because of the disturbance
in Peru,'' Refco's Steel said.
Demands by protestors for more investment in the area will
force the company ``to leave,'' Peru's Economy Minister Pedro-
Pablo Kuczynski told Lima-based radio station Radioprogramas
today. ``Tintaya is a marginal mine in a remote area'' and ``is
fundamental for the development of the region,'' he said.
In London, copper for delivery in three months rose $21, or
0.7 percent, to $3,090 a metric ton ($1.40), the highest since
May 11. The contract for immediate delivery traded $186 higher
than the three-month contract, the widest gap since January 31.
In Shanghai, copper for July delivery rose 0.4 percent to
31,100 yuan a ton ($1.70 a pound).
A futures contract is an obligation to buy or sell a
commodity at a set price by a specific date.
--With reporting by Alex Emery in Lima and Chanyaporn Chanjaroen
in London. Editors: McKiernan, Stroth. |
