Copper May Decline as Prices at Five-Month High Spur Selling by Investors

Sep 27 (Bloomberg) -- Copper may fall in New York and London as prices at a five-month high spur some investors to sell the metal and a stronger dollar reduces the appeal of commodities as an alternative investment.

Copper rose as high as $3.644 a pound, the highest intraday level since April 12, on the Comex in New York. The euro slipped against the dollar before Ireland discloses the cost of bailing out Anglo Irish Bank Corp. A stronger U.S. currency makes dollar-priced metals more expensive in terms of other monies.

"Some profit-taking on the back of the strong run of the last week, a rising dollar and heavy resistance at the $8,000 mark” pulled prices down, Eugen Weinberg, an analyst at Commerzbank AG, said today by phone. London Metal Exchange prices climbed as high as $7,990 a metric ton last week.

Copper for delivery in December slipped 0.15 cent to $3.6165 a pound at 8:24 a.m. on the Comex. The most-active contract added 2.7 percent last week. Copper for delivery in three months was little changed at $7,943 a metric ton on the LME.

Prices climbed 3.9 percent on the Comex in last week’s final three days, when financial markets in China were closed for the Mid-Autumn Festival. The country is the world’s largest consumer of copper.

"The Chinese have made a tentative start after returning from their holidays,” Leon Westgate, an analyst at Standard Bank Plc in London, said today.

Copper needs "something quite special” for prices to exceed the "historic resistance level” of $8,000 a ton, Citigroup Inc. analysts led by Jon Bergtheil in London said in a report today. The metal last rose above that price on April 12, according to data compiled by Bloomberg.

"That something special could be some dramatically good economic news,” the analysts said. They assessed the chance of that happening at 25 percent, gave the same odds to a potential "sharp” decline in copper inventories, and put the probability of a weakening of the dollar at 50 percent.

"On the balance of these probabilities, then, we believe it is likely that copper will at best ‘pause’ for a while,” Citigroup said. The analysts also considered the chance that prices might fall by around $1,500 a ton before they "justifiably advance through old highs,” the report shows.

The euro slid from a five-month high against the dollar on speculation European banks will need more funds. Irish Finance Minister Brian Lenihan, who said Sept. 22 that costs to bail out Anglo Irish will be "manageable,” is scheduled to publish the latest estimates by Oct. 1.

Smaller Inventories

LME copper stockpiles fell 0.6 percent to 378,125 tons, the lowest level since Nov. 4, daily exchange figures showed. Inventories posted a 31st weekly drop in a row last week and have slid 25 percent this year, on course for the first annual contraction since 2004.

One party held between 30 percent and 39 percent of the stockpiled metal as of Sept. 23, and another party accounted for between 40 percent and 49 percent.

Orders to draw copper from inventories, or canceled warrants, fell for a fourth day, declining 6.4 percent to 24,275 tons.

Tin for three-month delivery on the LME rose 0.7 percent to $23,775 a ton. It touched $23,950 in the prior session, the highest intraday price since May 28, 2008. The metal is this year’s best LME performer, up 40 percent, beating the 25 percent gain by closest rival nickel. Production disruptions in the Democratic Republic of Congo and Indonesia bolstered prices.

A tailings dam at Zijin Mining Group’s Xinyi Yinyan tin mine broke on Sept. 21 after a landslide triggered by heavy rains from Typhoon Fanapi, the Fujian-based company said in a statement yesterday.

Nickel rose 1.1 percent to $23,162 a ton and aluminum was little changed at $2,319 a ton. Lead dropped 0.5 percent to $2,285 a ton and zinc declined 0.9 percent to $2,227.75 a ton.