Copper Falls From Seven-Month High as Demand Eases After Rally

NEW YORK, June 2 -- Copper fell from the highest in seven months on speculation that the price increased too fast, outpacing demand.

    Copper has surged 63 percent this year, partly because China, the world's biggest user of the metal, bought supplies for its national reserves. European and U.S. demand remains slack, analysts said.

    "The upward move in prices during the last few days has been phenomenal," said Alex Heath, the head of industrial metals trading at RBC Capital Markets in London. "People question the speed of the recovery."

    Copper futures for July delivery dropped 2.15 cents, or 0.9 percent, to $2.2975 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $2.353, the highest since Oct. 15.

    The metal jumped 9.3 percent in the prior three sessions.

    "Copper has gotten a little bit ahead of itself and needs to cool off," said Donald Selkin, the chief market strategist at National Securities Corp. in New York. "The gain has been a little outsized, so it's natural to see some profit-taking."

    Bret Clayton, the chief executive officer of Rio Tinto Group's copper unit, said today that the outlook for the metal remains "uncertain" in the next 12 months.

    Futures pared declines after a report showed U.S. pending home sales in April increased by the most since 2001, renewing speculation the economy may rebound.

    "People are really getting excited by this idea that the worst is over," said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago.

    LME Inventories

    Stockpiles of copper in warehouses monitored by the London Metal Exchange slid for an 18th straight session to 309,225 metric tons, the lowest since Dec. 12. Inventories have declined 44 percent from a high this year on Feb. 25.

    "The price hike has predominantly been driven by China's reserve purchases and hopes of an imminent economic turnaround," Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said in a report.

    The rally may stall, "given that demand remains weak," Weinberg said. There may be "a massive correction of copper prices soon," he said.

    Copper for delivery in three months fell $25, or 0.5 percent, to $5,050 a ton ($2.29 a pound) on the LME.

    In London, aluminum was little changed at $1,472 a ton. Nickel dropped 0.2 percent to $14,620, and tin eased 1 percent to $14,500. Lead was steady at $1,659, and zinc declined 1.9 percent to $1,580.

    (Source: Bloomberg)