Copper Drops as Some Investors Sell, German Investor Confidence Declines

Sep 14 (Bloomberg)--

Copper fell in London as some investors sold the metal to lock in profits from the biggest advance in almost two weeks.

Copper for three-month delivery rose 1.9 percent yesterday on the London Metal Exchange, the most since Sept. 1. The metal also retreated as German investor confidence fell more than analysts expected, European industrial production unexpectedly stagnated and inventories tracked by the LME edged higher after shrinking for seven days in a row.

"LME prices are flat to slightly weaker as the complex suffers from profit-taking” before the release of U.S. economic figures, said David Thurtell, a Citigroup Inc. analyst in London.

Copper for delivery in three months slid $85, or 1.1 percent, to $7,545 a metric ton at 12:29 p.m. on the LME. Copper for delivery in December fell 1.3 percent to $3.4325 a pound on the Comex in New York.

Germany’s ZEW Center for European Economic Research said its index of investor and analyst confidence, which aims to predict developments six months ahead, dropped to minus 4.3 from 14 in August. Economists had forecast a reading of 10, according to the median of 36 estimates in a Bloomberg News survey.

The figures "pointed to a deterioration in the currently strong conditions,” Thurtell said. Germany is the world’s third-biggest consumer of copper after China and the U.S.

Retail Sales

Economists had predicted that industrial output in Europe would gain 0.1 percent in July, the median of 35 forecasts in a Bloomberg survey showed. The European Commission yesterday forecast a more "moderate” expansion in the region’s economy in the second half.

Sales at retailers in the U.S., the world’s second-biggest copper user after China, probably rose in August for a second month, economists said before the scheduled release of Commerce Department figures at 1:30 p.m. London time. Purchases climbed 0.3 percent following a 0.4 percent gain in July, according to the median estimate of 76 economists.

LME copper stockpiles today gained 75 tons to 390,525 tons, according to daily exchange figures. Still, they have dropped 22 percent in 2010, heading for the first annual contraction in six years.
"We forecast inventories to fall sharply through 2011 and 2012,” analysts at Nomura Holdings Inc. led by Paul Cliff in London wrote in a report dated Sept. 10.

Supply Gap

Demand probably will outpace supply by 263,000 tons this year, with the gap widening to 664,000 tons next year, Nomura said. It predicted an average price this year for immediate- delivery copper of $7,485 a ton, rising to $8,377 next year.

Orders to draw copper from LME inventories, or canceled warrants, jumped 10 percent, the most since Aug. 18, to 22,825 tons.

Market open interest for copper, or the number of futures contracts outstanding, gained 1.3 percent to 449,628 lots on Sept. 10, the latest LME data showed. That was the highest level in 18 months.

Aluminum for three-month delivery on the LME fell 0.4 percent to $2,121.25 a ton. The lightweight metal should reach $2,400 by the end of the year, Laredo, Texas-based researcher Harbor Intelligence said in a report.

"A weak dollar, falling fear, accelerating demand in China and falling aluminum output in that country have increased our conviction of higher prices for the next quarter,” Harbor said.

Nickel slipped 0.4 percent to $22,752 a ton. LME stocks, down 25 percent this year, rose 0.2 percent to 119,034 tons today. Cash nickel’s discount to three-month metal widened to $6 a ton yesterday from $4, the narrowest level since Sept. 2, 2009, in the prior session. Cash metal was at a $45 discount a week ago.

Tin slid 1.1 percent to $22,050 a ton after yesterday touching $22,301, the highest intraday price since July 31, 2008. Lead dropped 1.6 percent to $2,215.75 a ton and zinc fell 0.7 percent to $2,129.75 a ton.