Copper Prices Fall Most in Three Weeks as Inventories Increase

LONDON, Sept. 21 -- Copper prices in New York fell the most this month as rising inventories spurred concern that demand will slacken.

    Stockpiles monitored by the London Metal Exchange increased for a 16th straight session to 327,700 metric tons, the highest level since May 22. Inventories tallied by the Shanghai Futures Exchange rose 7 percent this week to a five-year high. Copper also dropped as the dollar rebounded, eroding the appeal of commodities.

    "There is more apprehension in the copper market with supply climbing higher," said Adam Klopfenstein, a senior market strategist at MF Global Ltd.'s Lind-Waldock unit in Chicago. "The stronger dollar is proving to be bearish."

    Copper futures for December delivery slid 11.1 cents, or 3.8 percent, to $2.785 a pound on the Comex division of the New York Mercantile Exchange, the steepest decline for a most-active contract since Aug. 31.

    This week, the metal fell 2.2 percent. The third straight drop followed a seven-week rally.

    On the LME, copper for delivery in three months fell $210, or 3.3 percent, to $6,175 a ton ($2.80 a pound).

    "We have seen quite a big build in copper stocks, and the fundamentals are looking weaker," said David Wilson, a Societe Generale SA analyst in London. "Investors are beginning to look at that, and they are a bit concerned."

    Canceled warrants, or metal booked for removal from LME- monitored warehouses, fell for a third day, sliding 21 percent to 6,400 tons. That amounts to 2 percent of stockpiles, down from 21 percent on May 1.

    China's Demand

    "In the absence of an increase in LME canceled warrants, there is no market-derived data to suggest that restocking is imminent," John Reade, UBS AG's head metals strategist in London, said in a note.

    Copper prices have doubled this year, helped by record first-half imports by China, the world's largest user. Import figures "point to further restocking in the country, albeit at a slower rate than the previous two quarters," Michael Lewis, a Deutsche Bank AG analyst in London, said in a report.

    The dollar climbed as much as 0.7 percent against a basket of six major currencies.

    Copper also dropped as traders who follow historical price patterns sold the metal after it failed to rise above the "psychologically important level of $3" a pound on the Comex, Matthew Zeman, a LaSalle Futures Group trader in Chicago, said this week.

    "Copper bulls just started throwing the towel in after we didn't get over $3," Klopfenstein of Lind-Waldock said.

    Aluminum, zinc, nickel, tin and lead also fell on the LME.

    (Source: Bloomberg)