Copper Rises in London on Speculation Demand to Keep Expanding
Copper rose in London on speculation that metals usage will keep swelling as economies improve, even if European governments cut budgets to rein in debts.
The economy in the 16 euro nations expanded at a faster pace than economists forecast in the first quarter as a global recovery boosted exports. The broadest indicator of economic health in Japan, the world’s fifth-biggest copper user, climbed to the highest level since 2008. Prices also gained as the dollar erased an advance.
“The real economies are picking up, but there is still a degree of nervousness over Europe,” said David Wilson, director of metals research at Societe Generale SA. “If governments across Europe will have to slash spending, maybe that will slow down the pace of recovery. But we definitely don’t think we will see any contraction in metals consumption from here.”
Copper for delivery in three months climbed $62, or 0.9 percent, to $7,112 a metric ton at 11:18 a.m. on the London Metal Exchange, wiping out a drop of as much as 2 percent. Futures for July delivery gained 0.5 percent to $3.2225 a pound on the Comex in New York.
LME copper has slid 4.3 percent this month on concern Greece and other indebted European nations will probably struggle to contain deficits. The Reuters/Jefferies CRB Index of 19 raw materials tumbled 5.9 percent last week, the most since December 2008, on concern that the Greek fiscal crisis might spread to other euro nations, endangering economies.
Loan Accord
Europe consumes 20 percent of global copper output and 15 percent to 25 percent of aluminum, zinc, nickel and lead production, according to Barclays Capital. Euro-zone leaders announced an agreement on May 10 to provide loans of as much as 750 billion euros ($947 billion), including support from the International Monetary Fund, for sovereign debtors.
Gross domestic product in the euro nations rose 0.2 percent, the European Union’s statistics office said. Economists had forecast growth of 0.1 percent. Japan’s coincident index climbed to 101.1 in March, the Cabinet Office said.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, slipped 0.1 percent, wiping out a climb of as much as 0.5 percent. Gains by the currency make dollar-priced metals more expensive in terms of other monies.
Price gains were capped by concern that the government in China may take more steps to control growth, Wilson said. The country’s economy is “overheating,” Nouriel Roubini, the New York University professor who forecast the U.S. recession more than a year before it began, said today on Bloomberg Television.
Chinese Lending
Consumer prices in China rose at the fastest pace in 18 months in April and new lending exceeded forecasts, figures showed yesterday. As real-estate prices surge, authorities have restricted pre-sales by developers, curbed loans for third-home purchases and on May 2 raised banks’ minimum reserve requirements for the third time this year.
“There is a clear attempt to try to take some heat out of the top end of the property market, but all these attempts of tightening in lending seem to have little impact,” Wilson said.
Concern about potential growth curbs in China helped LME copper to drop 4.6 percent in April after two monthly gains in a row. The country’s benchmark one-year lending rate will rise by Sept. 30, according to 19 of 20 economists surveyed by Bloomberg News yesterday, with 10 of the analysts predicting an increase as early as this quarter.
Inventories of copper tracked by the LME fell for a 12th day today, slipping 0.2 percent to 486,375 tons, the lowest level since Dec. 29. Stockpiles dropped in March and April. Bookings to remove metal from warehouses jumped after falling for 10 days, gaining 9.3 percent to 17,000 tons.
Zinc, Nickel
Zinc for three-month delivery on the LME added 1.6 percent to $2,103.75 a ton. The contract has slid 18 percent this year, the most among the six main metals traded on the LME. Stockpiles in warehouses monitored by the exchange have risen 17 percent this year to 570,875 tons.
Nickel, this year’s best performer on the LME, rose 1.4 percent to $22,900 a ton, for an annual increase of 24 percent. Aluminum gained 1.2 percent to $2,130 a ton, lead advanced 0.2 percent to $2,053 a ton and tin rose 1.3 percent to $17,750 a ton.
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