Copper Declines From 13-Month High as the Dollar Strengthens

LONDON, Oct. 23 -- Copper fell from the highest price in almost 13 months in New York as the dollar strengthened, eroding metals' appeal as an alternative investment.

    The dollar rose from yesterday's 14-month low against the euro on speculation that China will curb stimulus spending after reports today showed the Asian nation's gross domestic product climbed at the fastest pace in a year in the third quarter and inflationary pressures grew. China, the world's biggest copper consumer, is spending 4 trillion yuan ($586 billion) on roads, power lines and other projects to stoke the economy.

    "The question now is how long can the economy sustain the stimulus package and when is the moment to exit these policies," Edward Meir, an MF Global Ltd. analyst, wrote today in a report. "It is becoming almost imperative to trade metals from the perspective of the dollar these days."

    Copper futures for December delivery fell 3.8 cents, or 1.3 percent, to $2.998 a pound on the New York Mercantile Exchange's Comex unit. The price reached $3.0575 yesterday, the highest for a most-active contract since Sept. 29, 2008.

    On the London Metal Exchange, copper for three-month delivery was unchanged at $6,590 a metric ton ($2.99 a pound), after also reaching the highest price in more than a year yesterday.

    The U.S. Dollar Index, a six-currency measure of the greenback's value, rose as much as 0.7 percent before paring gains. The euro topped $1.50 yesterday for the first time since August 2008 and has climbed 7.6 percent this year against the U.S. currency. A declining dollar makes metals cheaper for buyers using other monies.

    Industrial Output

    A weaker dollar has helped copper prices to double this year, along with record first-half shipments into China. Industrial production in the country climbed 13.9 percent in September from a year earlier, the fastest pace in more than a year, figures from the statistics bureau showed.

    Gross domestic product rose 8.9 percent in the third quarter from a year earlier, the agency said in Beijing today. The government is paying "close attention" to the prospect of inflation, statistics bureau spokesman Li Xiaochao said today.

    Chinese output of copper and aluminum gained 8 percent in September from the prior month, causing concern that production may be exceeding demand, Eugen Weinberg, a Commerzbank AG analyst in Frankfurt, said today in a report. The country "has been producing more aluminum than ever before," he said.

    Consumption in Asia will drive demand for minerals, said BHP Billiton Ltd., the world's largest mining company.

    "We stand at the threshold of an era of unprecedented growth due to demand generated by China and, in the future, India," Chairman Don Argus said today.

    Strike at Spence

    A strike at BHP's Spence copper mine in Chile entered its 10th day today. Workers are prepared stay away for a "long time" unless the company improves its wage and benefits offer, a union official said yesterday.

    Spence miners are seeking similar terms to BHP workers at the Escondida copper mine, also in northern Chile, said Daniel Ibacache, a union spokesman. The mine accounts for 1 percent of global copper production, he said.

    In other LME markets, nickel and lead fell, while tin and zinc rose. Aluminum was unchanged.

    (Source: Bloomberg)