Copper Jumps to Nine-Month High on Outlook for Increased Demand

LONDON, July 21 -- Copper jumped to a nine-month high on speculation that rallying equity markets signal a recovery in global growth, which will spur gains in metal use.

    Copper has surged more than 74 percent this year as demand rose in China, the world's largest buyer, and the U.S. housing market stabilized. Rallying equity markets signal an improved outlook for the global economy, said Lannie Cohen, the president of Capitol Commodity Services Inc. The Standard & Poor's 500 Index extended last week's 7 percent gain, the most since March.

    "The economy is starting to look like it's really gearing up," Cohen said by telephone from Indianapolis. "The better outlook for the economy is going to mean better demand for copper."

    Copper futures for September delivery climbed 4.6 cents, or 1.9 percent, to $2.469 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $2.4895, the highest for a most-active contract since Oct. 14.

    The S&P 500 gained as much as 1.1 percent, while the MSCI World Index of equities climbed 1.4 percent.

    Copper surged 9.6 percent last week, the biggest gain since early March, on signs of improvement in the U.S. housing market. Builders are the largest copper consumers, using pipes and wires made from the metal.

    "The latest fundamental data suggest that demand is starting to improve and that downside risks to prices from current levels are fading," Tobias Merath, Credit Suisse Group AG's head of commodity research in Zurich, said in a report. "The likely increase in housing construction activity and strong car sales should see demand for base metals picking up."

    Housing Market

    Work began on new U.S. homes at an annual rate of 582,000 units in June, up 3.6 percent from May, and the fastest pace since November, the Commerce Department reported last week.

    China's imports of copper and related products climbed to a record 475,999 metric tons in June, government data show. A 4 trillion yuan ($585 billion) government stimulus package helped spur the increase.

    "Even if Chinese restocking efforts come to an end, this source of demand should be replaced by a recovery of real consumption," Merath said.

    On the London Metal Exchange, copper for delivery in three months jumped $40, or 0.8 percent, to $5,350 a metric ton ($2.43 a pound). The metal touched a record $8,940 on July 2, 2008.

    Among other LME-traded metals, aluminum, nickel, zinc, tin and lead also rose.

    (Source: Bloomberg)