copper rises in new york

Copper Rises in New York on Speculation Rate Cut to Spur Demand

By Millie Munshi

Sept. 17 (Bloomberg) -- Copper rose on speculation the Federal Reserve will cut interest rates, spurring economic growth and demand for metals in the U.S.

Fed policy makers will cut the benchmark target rate by a quarter percentage point to 5 percent tomorrow, according to the median forecast of economists surveyed by Bloomberg News. Before today, copper had fallen 4.5 percent in the past two months on concern the economy would slow.

``It's likely to be supportive for copper if the Fed cuts its rate,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet LLC in Stamford Connecticut. ``It will put to rest certain economic concerns.''

Copper futures for December delivery gained 1.8 cents, or 0.5 percent, to $3.4105 a pound at 11:18 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the highest settlement for a most-active contract since Aug. 13.

The Fed has kept rates unchanged at 5.25 percent since June 2006. Financial-market turmoil and a housing slump that threaten to drag down the economy will prompt the central bank to cut rates at its policy meeting tomorrow, analysts said.

``An interest-rate cut looks inevitable and prudent at this point,'' John Kemp, an analyst at Sempra Metals Ltd. in London, said in an e-mailed note.

Copper, used in homes, appliances and cars, has gained fourfold in the past four years as a global expansion boosted demand. The U.S. is the world's second-largest copper consumer after China.

Inventories Decline

A drop in copper inventories also drove the price higher today, Chidley said. Stockpiles monitored by the London Metal Exchange fell 2,000 metric tons, or 1.5 percent, to 133,750 tons. That's the lowest level since Aug. 24.

Supply constraints may lead to a ``significant spike'' in the copper price next year, Credit Suisse analysts led by Jeremy Gray in London said in a report on Sept. 14.

``New supply is still likely to remain muted,'' Gray said. The copper market ``is likely to be in deficit in 2008.''

Labor unrest and lower ore grades have reduced mine output this year as mining companies including Xstrata Plc, Rio Tinto Group and Teck Cominco Ltd. reported lower copper production.

``The mining industry generally has difficulty bringing on new supply and also even maintaining current supplies,'' Don Lindsay, Teck's chief executive officer, said in an interview last week.

New York Manufacturing

The metal pared gains after a report showed the pace of manufacturing in New York cooled more than forecast in September. The New York Fed's general economic index fell to 14.7 from 25.1 in August, the bank said today. Readings greater than zero signal expansion. Economists had forecast the index would drop to 18, according to a Bloomberg News survey.

On the LME, copper for delivery in three months was little changed, dropping $30, or 0.4 percent, to $7,520 a metric ton. The metal rose to a record $8,800 a ton in May 2006.

To contact the reporter on the story: Millie Munshi in New York at [email protected] .

Last Updated: September 17, 2007 11:19 EDT