Copper Falls as U.S. Producer Prices, Housing Starts Decline

NEW YORK, Aug. 19 -- Copper fell for a third session after housing starts in the U.S. unexpectedly declined last month and July's wholesale prices dropped more than forecast.

    The 1 percent decline in housing starts to an annual rate of 581,000 was the first drop in three months, the Commerce Department said today. Builders are the biggest users of copper in the U.S., installing about 440 pounds (181 kilograms) of pipes and wires made from the metal in the average single-family home, according to the Copper Development Association.

    "This morning's weaker-than-expected inflation numbers, coupled with a decline in U.S. housing starts, have copper bulls on the defensive," Ralph Preston, a Heritage West Futures Inc. analyst in San Diego, said in an e-mail.

    Copper for December delivery fell 1.1 cents, or 0.4 percent, to $2.7745 a pound on the New York Mercantile Exchange's Comex unit. On the London Metal Exchange, copper for three-month delivery rose 0.5 percent to $6,080 a metric ton.

    The metal will need to top $2.86 a pound "to reignite bull trending forces," Preston said.

    The drop in U.S. wholesale prices capped the biggest 12-month decline on record and showed inflation will not be an immediate concern for Federal Reserve policy makers. Some investors buy copper as a store of value when inflation accelerates. Slowing inflation typically cuts investment demand for the metal.

    Core Prices Fall

    The 0.9 percent decrease in prices paid to factories, farmers and other producers followed a 1.8 percent gain in June, the Labor Department said. Excluding food and fuel, so-called core prices unexpectedly fell 0.1 percent.

    Construction of single-family houses, which account for 75 percent of the industry, rose 1.7 percent to a 490,000 rate, today's report showed. The U.S. is the second-biggest consumer of copper in the world, behind China.

    Copper rose earlier in New York and London after a report by the ZEW Center for European Economic Research showed German investor sentiment rose to 56.1 in August from 39.5 in July.

    "We are quite hopeful now that these figures from Germany and the U.S. will show the global economy is recovering, so even if there is a slight softening in demand from China, it will be picked up from the rest of the world," Mark Heyhoe, an analyst at Hanson Westhouse Ltd. in London, said in a telephone interview.

    Among other LME metals for three-month delivery, aluminum rose 2.3 percent to $2,005 a ton. Nickel fell 1.6 percent to $18,800 a ton, tin dropped 0.4 percent to $13,850 a ton, lead advanced 1.4 percent to $1,810 a ton and zinc climbed 1.4 percent to $1,795 a ton.

    (Source: Bloomberg)