Copper Gains in London as Dollar Weakens, China Makes Purchases

Jan. 18 (Bloomberg) -- Copper rose in London, buoyed by a weaker dollar and purchases from China, the world's largest user of the metal. Aluminum, lead and zinc also increased.

The dollar index dropped as much as 0.3 percent against a basket of six other major currencies, boosting demand for metals as a hedge against the currency's weakness. London Metal Exchange copper prices are trading at a discount to those in Shanghai, encouraging Chinese importers to buy cheaper copper on the international market, a practice known as arbitrage.

"The arbitrage into Shanghai is still supportive for copper," said Randy North, a trader at RBC Capital Markets in London. Prices are also responding to the weakening dollar, he said.

Copper for three-month delivery gained 1.4 percent, to $7,530 a metric ton at 1:10 p.m. local time. The contract ended 0.4 percent lower last week. The March contract added 1.8 percent to $3.425 a pound on electronic trading at the Comex unit of the New York Mercantile Exchange.

The April contract on the Shanghai Futures Exchange ended down less than 0.1 percent at 60,560 yuan a ton ($8,870). Chinese prices usually include a 17 percent value added tax and import fee.

Copper stockpiles monitored by the LME fell 0.4 percent to 523,450 tons, the first daily drop since Nov. 2, according to the bourse's data. Including those tracked by bourses in Shanghai and New York, they totaled 714,953 tons, close to a six-year high.

"While current sentiment focuses on the build in stock, continuing signs of improvement in a number of global indicators of industrial activity could offset that worry," said Morgan Stanley analysts led by New York-based Hussein Allidina in an e- mailed report dated yesterday.

U.S. Holiday

The U.S. observes the Martin Luther King Jr. holiday today and there is no floor trading on Comex.

Hedge-fund managers and other large speculators increased their net-long position in New York copper futures in the week ended Jan. 12 by 36 percent to 22,541 contracts from a week earlier, according to U.S. Commodity Futures Trading Commission data. That's the highest since June 2005.

PT Newmont Nusa Tenggara, an Indonesian venture of Newmont Mining Corp., halted pit operations at the Batu Hijau copper and gold mine after a worker died in an accident, according to a company statement.

The firm last year cut its five-year output projection by 7 percent after a partial pit-wall collapse stopped mining for three weeks, the Ministry for Energy and Mineral Resources said Oct. 14. The mine might produce 455 million pounds (206,385 metric tons) of copper and 486,000 ounces of gold last year, the company had said in February.

Cyclone Warning

Among other LME metals for three-month delivery, aluminum added 0.8 percent to $2,324.75 a ton and tin fell at $18,000 a ton. Zinc gained 1.2 percent to $2,499.25 a ton. Lead advanced 1.8 percent at $2,479 a ton.

Aluminum inventories dropped for an eleventh day to 4.58 million tons, the lowest since Nov. 18.

Shipments of zinc concentrate, raw material to produce the metal, at Karumba port in Australia's Gulf of Carpentaria has been suspended because of a cyclone warning, said China Minmetals Corp., the nation's largest metals trader.

The Chinese firm last month restarted concentrate production at Century, the world's second-largest zinc mine located in Australia, following an 11-week halt because of a ruptured pipeline.