Copper Rises for Second Day as Weaker Dollar Buoys Commodities

LONDON, Sept. 23 -- Copper prices rose for a second day as the dollar weakened, boosting demand for commodities as a hedge against inflation.

    The dollar fell against 16 major currencies, touching a one-year low versus the euro. The U.S. Dollar Index, a basket that includes the euro and yen, has dropped 14 percent since reaching a three-year high on March 4. During that period, copper jumped 69 percent.

    "We've seen the dollar breakdown and that's helping send all the commodities higher, especially copper," said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida. "As more people get worried about inflation, it's going to benefit the metals."

    Copper futures for December delivery gained 5.9 cents, or 2.1 percent, to $2.8645 a pound on the New York Mercantile Exchange's Comex division. The metal added 0.7 percent yesterday.

    Chinese imports of refined copper in August dropped 25 percent from the previous month to 219,731 metric tons, government figures showed today. China is the world's biggest copper user.

    "You've seen a little bit of slowdown in China's demand, but it's still strong," Smith said. "With the economy getting back into gear, it's going to mean better fundamentals for copper."

    Last month's imports were more than double the level of August 2008, the data show. Record inbound shipments during the first half helped double copper prices this year.

    Inventory Drop

    Prices also got a boost today as the London Metal Exchange reported a decline in copper inventories it monitors, the first drop in 18 sessions. Warehouse stockpiles slipped 50 tons to 331,775 tons, according to a daily LME report.

    Copper has fallen from this year's high of $2.9895 on Aug. 28 as rising stockpiles signaled easing consumption. Supplies tracked by the LME are up 11 percent this month. In Shanghai, copper inventories climbed 7 percent last week to a five-year high, rising for an eighth week.

    "The demand boom in China, partly owing to the buildup of strategic stocks, will abate in the second half and a supply surplus will therefore emerge," Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, said today in a report.

    Copper demand topped output in the first half, creating a production deficit of 292,000 tons, the International Copper Study Group in Lisbon said in a report yesterday. That was more than last year's 234,000-ton shortfall, the report showed.

    Surplus Predicted

    "You need to add on 400,000 tons of Chinese stock build, at least," said Max Layton, an analyst at Macquarie Bank Ltd. in London. "The data suggest, after you account for Chinese stock build, that the market was in surplus of a couple of hundred thousand tons."

    He predicted a surplus for this year of between 400,000 and 500,000 tons.

    On the LME, copper for three-month delivery rose $80, or 1.3 percent, to $6,270 a ton ($2.84 a pound).

    Among other LME metals for three-month delivery, aluminum, nickel, tin, lead and zinc also gained.

    (Source: Bloomberg)