Copper Drops to One-Month Low on Inventory Gain, Housing Data

LONDON, Sept. 25 -- Copper prices tumbled to a one- month low as rising metal inventories and downbeat economic reports stoked concern that demand may dwindle.

    Stockpiles in warehouses monitored by the London Metal Exchange have jumped 14 percent this month. Sales of existing U.S. homes unexpectedly fell in August, and German business confidence trailed analysts' forecasts. Copper prices are headed for a fourth straight weekly decline.

    "People are trying to determine what the next direction in copper will be, and they're getting worried that demand is not strong," said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York. "The rising inventories are causing concern."

    Copper futures for December delivery fell 9.85 cents, or 3.5 percent, to $2.7095 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the metal touched $2.6915, the lowest level for a most-active contract since Aug. 19.

    U.S. existing-home sales dropped 2.7 percent to a 5.1 million annual rate, the National Association of Realtors said today. Economists forecast purchases would rise to a 5.35 million rate, the median of 74 forecasts in a Bloomberg survey.

    The Munich-based Ifo institute's German business climate index advanced to 91.3 from 90.5 in August. Economists expected a gain to 92, the median of 40 forecasts in a Bloomberg survey.

    "There is a sense things are slowing down a bit," said Alex Heath, the head of industrial-metals trading at RBC Capital Markets in London. "We are watching excess stocks rising."

    LME inventories increased 2.7 percent today to 340,875 tons, the highest since May 20.

    'Uncertainty'

    Rio Tinto Group, the world's third-biggest mining company, said customers remain "cautious" about restocking, citing "uncertainty" on the global economic recovery.

    Nexans SA, the world's biggest maker of cables and wires, may reduce production capacity of basic copper wires in France by more than half as demand sags. Capacity at its continuous- casting plants, which transform copper cathodes into wiring, may fall to 200,000 tons a year from 500,000 tons, spokeswoman Celine Revillon said.

    There are "some signs of restocking in the U.S. and Europe," Catherine Raw, a fund manager in the natural-resources team at BlackRock Inc., said in report. "Should these trends gather momentum for the rest of the year, it looks as though we might start to see normalized-demand levels for commodities in 2010."

    Strike Vote

    BHP Billiton Ltd. workers at the Spence copper mine in Chile will vote on whether to strike next week after rejecting the company's latest pay offer, a union official said yesterday. Workers may start a strike on Oct. 3 for an indefinite period, said Andres Ramirez, the president of the union representing the miners.

    "There is a good chance there will be a strike," Heath of RBC said. "Given that copper prices have more than doubled this year, many of the unions want a share of the growth."

    On the LME, copper for delivery in three months fell 2.7 percent to $5,960 a ton ($2.70 a pound.)

    Aluminum, nickel, zinc, tin and lead also declined in London.

    (Source: Bloomberg)