copper snaps two days of gains

Copper Snaps Two Days of Gains as Stockpiles Jump; Nickel Falls

By Chanyaporn Chanjaroen

Aug. 8 (Bloomberg) -- Copper snapped two days of gains in London after stockpiles jumped the most in 19 months, boosting availability of the metal used in plumbing and power cables. Nickel, lead and other industrial metals also dropped.

Copper inventories monitored by the London Metal Exchange rose 8.2 percent to 114,275 metric tons, the biggest gain since December 2005, the exchange said today in a daily report. Almost all the increase was recorded in Gwangyang, South Korea. The port is the LME-registered warehouse closest to China, the world's biggest user of copper.

Stockpiled metal has been shipped out of China to take advantage of international prices that are higher than domestic prices, said Tobias Merath, a commodity analyst at Credit Suisse Group in Zurich. ``High imports into China in the first quarter created more supply, which we're seeing now,'' he said today in a telephone interview.

Copper for delivery in three months on the LME fell $185, or 2.4 percent, to $7,560 a ton as of 11:20 a.m. local time.

Metal stored at LME-approved warehouses provide users with a supply of last resort, and changes to inventory levels typically indicate the balance between production and demand.

Stockpiles at Gwangyang have more than quadrupled since the beginning of June. The port, along with Busan in South Korea, each have more copper inventories than any other location monitored by the LME. China doesn't have a port registered with the exchange, the world's largest metals market.

South Korean stockpiles will probably rise until the end of September, pushing copper to as low as $7,000, Merath said.

Shortage

Jim Lennon, an analyst at Macquarie Bank Ltd. in London, said yesterday that copper will be supported for the rest of the year by a shortage of concentrate, the raw material smelted and refined into metal.

``Copper is probably alone among the major base metals, with the exception of tin, that will probably revisit the all- time highs over the next few months,'' Lennon said in an interview. Copper traded at a record $8,800 on May 11, 2006.

A Mexican arbitration court ruled that strikes halting output at three mines belonging to copper producer Grupo Mexico SAB since last week are illegal, the Ministry of Labor said yesterday. Striking workers won't return to work immediately as an appeal will be lodged, a lawyer representing the workers' labor union said.

Nickel dropped $600 to $28,200 a ton as inventories of the metal mostly used in stainless steel continued to rise. Stockpiles climbed 6.9 percent to 17,826 tons, the highest since June 2006. They have more than doubled this year.

Stainless Cuts

Nickel has fallen 15 percent this year, becoming the LME's biggest loser after zinc, as steelmakers reduced purchases following record prices in May. Demand is rising in China, the largest producer of stainless steel, said Kerry Harmanis, chairman of Australian nickel producer Jubilee Mines NL.

``That is about an extra 1.5 million tons of nickel required per annum,'' Harmanis said today at the Diggers & Dealers conference in Kalgoorlie, Western Australia.

Lead dropped $45 to $3,105. The metal traded at a record $3,500 on July 23. LME-monitored inventories declined 3.8 percent to 33,975 tons, the lowest since April 2.

``Lead will rebound as exports from China have declined,'' Gayle Berry, a metals analyst at Barclays Capital in London, said today in a telephone interview. ``Consumers are seeking stockpiles from the LME, which usually are the last resort,'' she said.

Among other LME-traded metals, aluminum dropped $25 to $2,640, tin fell $250 to $16,500 and zinc slid $15 to $3,395.

-- With reporting by Jesse Riseborough in Melbourne, Brett Foley and Mark Barton in London, Valerie Rota and William Freebairn in Mexico City. Editor: Casey (jdg).

To contact the reporter on this story: Chanyaporn Chanjaroen in London at [email protected]

Last Updated: August 8, 2007 06:44 EDT