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Copper Gains for Fourth Day on Weaker Dollar, Shrinking Metal Inventories
Sep 7,2010 10:45CST
industry news

Sep 6 (Bloomberg)--

Copper rose for a fourth day in London as a weaker dollar fueled demand for commodities as an alternative investment and stockpiles shrank further.

The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.2 percent. A slumping dollar makes raw materials priced in the currency cheaper in terms of other monies. Inventories tracked by the London Metal Exchange, which last week slid below 400,000 metric tons for the first time since November, dropped for a second day today.

"A weaker dollar” helped copper prices, Andrey Kryuchenkov, an analyst at VTB Capital in London, said in a note. “Copper inventories remain depressed, and the trend in stock draws is persistent.”

Copper for delivery in three months added $80, or 1 percent, to $7,726 a ton at 9:58 a.m. on the LME. The contract on Sept. 3 touched $7,750, the highest intraday price since April 27. Copper for delivery in December gained 0.6 percent to $3.5215 a pound in electronic trading on the Comex in New York.

LME prices gained for a third week in a row last week, bolstered by optimism about the outlook for the U.S. economy after monthly employment figures exceeded estimates. Copper climbed today as U.K. factory production rose at a record pace in the third quarter, a survey by the Engineering Employers Federation and BDO Stoy Hayward LLP showed.

Factory Orders

"The base-metal complex extended gains from the previous week on bullish momentum across the broader market after better- than-expected U.S. jobs data,” Kryuchenkov said. “Macro events continue to dominate as investors hope for improving data.”

A report tomorrow may show the economic recovery is continuing in Germany, the world’s third-largest copper user after China and the U.S. German factory orders probably rose 0.5 percent in July after gaining 3.2 percent in the previous month, economists said before the Economy Ministry report.

Comex trading floors in New York and Chicago are closed today for the Labor Day holiday.

LME copper stockpiles dropped 0.2 percent to 396,875 tons, the lowest level since Nov. 10, according to daily exchange figures. They fell for a 28th week in a row last week, the longest weekly streak of declines since August 2004, and are down 21 percent this year, on course for the first annual drop since 2004.

Delayed Mines

"Supply will be under constant pressure to keep up with demand in the years ahead,” Dan Smith, an analyst at Standard Chartered Plc in London, said today in a report. “Mine projects are being delayed due to the recent recession.”

Orders to draw copper from LME inventories, or canceled warrants, dropped for a third day, sliding 5.6 percent to 26,100 tons.

Nickel for three-month delivery on the LME advanced 2.7 percent to $22,190 a ton after reaching $22,250, the highest price since Aug. 19. Inventories, which fell for six months through July, slid for a second day to 119,886 tons. Stockpiles rose 1 percent last month, below the year-earlier 7.1 percent increase and the 5.6 percent gain in August 2008.

"Inventory build in the base-metal space during a seasonally weaker demand month was much lower in comparison with both August 2008 and 2009,” analysts at Macquarie Bank Ltd. led by Jim Lennon said in a report today.

Aluminum rose 2 percent to $2,189 a ton and zinc advanced 2.2 percent to $2,198 a ton. Tin climbed 1.4 percent to $21,500 a ton and lead rose 1.8 percent to $2,207 a ton.








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