Copper Falls in London on Speculation That Supply Will Beat Use...

Copper Falls in London on Speculation That Supply Will Beat Use

By Brett Foley

Jan. 12 (Bloomberg) -- Copper dropped in London, snapping three days of gains, on speculation that a slowdown in demand growth and rising stockpiles will create an oversupply.

Inventories tracked by the London Metal Exchange rose for a third day by 1,400 metric tons to 196,850 tons, the exchange said in a daily report. The metal used in pipes and wires dropped 11 percent last week as slower U.S. economic growth and rising stockpiles sparked concern that the market may move into a surplus for the first time since 2003.

``There is very little concern that there will be a shortage of copper this year,'' said Andrew Silver, an analyst with Natexis Commodity Markets Ltd., one of 11 companies trading on the floor of the LME. ``We believe the overall trend for the copper price is down.''

Copper for delivery in three months on the LME dropped $75, or 1.3 percent, to $5,820 a metric ton as of 12:39 a.m. local time. The metal has gained 3.1 percent this week.

Supplies probably will beat usage by 250,000 tons this year, Macquarie Bank Ltd. analysts led by Jim Lennon in London said in a Jan. 3 report. Inventories tracked by commodity exchanges in London, Shanghai and New York have gained 53 percent to 260,242 tons in the past three months, according to data compiled by Bloomberg.

Copper has been partly supported this week by expectations that Chinese buyers will take advantage of lower prices to replenish stockpiles.

New Year Holiday

Chinese imports of copper and copper products dropped 19 percent last year, the Beijing-based customs office said yesterday. Users turned to stockpiled metal, putting off purchases on expectations that prices would decline. China, the world's largest consumer of copper, accounts for about 20 percent of global consumption.

``People keep expecting this buying to come from China, but its difficult to predict when they will start buying,'' said Natexis's Silver.

China may purchase more copper this month and the next as wiremakers stock up to ensure output isn't disrupted during the weeklong Lunar New Year holiday that begins next month, Beijing Antaike Information Development Co. said in a Jan. 5 report.

The price of copper was also supported by concern output by Chile's Codelco, the world's biggest producer, may be disrupted. Codelco said on Jan. 10 a rockslide may occur at the Chuquicamata mine, the company's largest, curbing output. A cave-in there last year also cut production.

Copper soared during to a record $8,800 a ton on May 11 as global demand exceeded production amid disruptions at mines. A strike at BHP Billiton Ltd.'s Escondida in Chile, the world biggest single source of copper, hurt production.

Nickel rose $700 to $34,200, its third consecutive gain on the LME, while zinc fell $3.75 to $3,870.25 a ton. Lead declined $9 to $1,620 and aluminum increased $1 to $2,736.