copper jumps most in 5 weeks on chinese demand

Copper Jumps Most in 5 Weeks on Chinese Demand, Inventory Drop

http://www.bloomberg.com/apps/news?pid=20601012&sid=aJH07R8MSWWs&refer=commodities

By Millie Munshi

Dec. 21 (Bloomberg) -- Copper surged 4.5 percent, the most in five weeks, after metal inventories in China slumped amid rising demand.

Stockpiles monitored by the Shanghai Futures Exchange dropped for a sixth straight week to 25,722 metric tons, the lowest since February. Chinese copper use jumped 38 percent in the nine months ended Sept. 30, the International Copper Study Group said yesterday. Copper futures have more than doubled in the past three years as Chinese consumption surged.

``We're seeing some interest overseas,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. ``Chinese buying is boosting prices.''

Copper futures for March delivery gained 13.2 cents to $3.0975 a pound on the Comex division of the New York Mercantile Exchange. The percentage gain was the biggest for a most-active contract since Nov. 14.

The metal climbed 4.8 percent this week after two straight weeks of declines. Usage in China will buoy demand as an economic slowdown threatens consumption in the U.S., traders said.

``We're moving higher off of expectations about Asian purchases,'' said Eric Wittenauer, an industrial-metals analyst at A.G. Edwards & Sons Inc. in St. Louis.

Global copper use rose 7.1 percent in the nine months ended Sept. 30, boosted by Chinese demand, the International Copper Study Group said. Supplies trailed consumption by 265,000 tons in the period, the group said.

`Substantial Deficit'

``The study group's report was mildly supportive for prices,'' Wittenauer said. ``It showed a rather substantial deficit through September.''

The metal also climbed on speculation that index-fund demand for industrial metals will rise next year. Investments in funds and products tracking commodity indexes will rise to $150 billion in January from $110 billion this year, according to Standard & Poor's.

``We're seeing some fund money come in,'' McGhee of Integrated said.

On the London Metal Exchange, copper for delivery in three months gained $265, or 4.1 percent, to $6,795 a metric ton ($3.08 a pound). The metal reached 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: December 21, 2007 14:10 EST