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Copper Gains in New York as Inventories Slump to Two-Month Low

By Millie Munshi

Jan. 18 (Bloomberg) -- Copper rose the most in a week after inventories fell for the ninth straight session to the lowest in almost two months.

Stockpiles monitored by the London Metal Exchange dropped 2,325 metric tons, or 1.3 percent, to 183,225 tons, the lowest since Nov. 21. The decline marked the longest slump in supplies since July. Before today, copper climbed 10 percent in the past month as LME supplies dropped 5.2 percent.

``LME stocks continue to decrease sharply,'' Edward Meir, an analyst at MF Global in Darien, Connecticut, said in a report.

Copper futures for March delivery gained 5.05 cents, or 1.6 percent, to $3.2325 a pound at 12:30 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage gain for the most-active contract since Jan. 8.

``Of all the metals, copper has probably got the best fundamentals as supply of concentrates is still very tight,'' Peter Sellars, chief executive officer of Sempra Metals Ltd., said today in an interview on Bloomberg Television in Shanghai.

Declines in inventories may be signaling an increase in demand from China, the world's largest metals buyer, traders said. Copper has quadrupled in the past five years as demand surged in the world's fastest-growing major economy.

``There's the suspicion that Chinese buying is adding some underlying support to the copper price,'' said Michael Gross, a futures analyst at OptionSellers.com in Tampa, Florida.

Copper has still fallen 2.2 percent this week, halting two straight weeks of gains, as the slumping U.S. economy signaled demand may dwindle. The U.S. is the world's second-largest copper user.

`Tug of War'

``Copper is in a tug of war between a slower U.S. economy and the fact that supplies seem to be tightening a bit,'' Donald Selkin, director of equity research at Joseph Stevens & Co. in New York, said yesterday.

The outlook for the U.S. is ``a little less gloomy today,'' Gross of OptionSellers said. The metal will benefit should the Federal Reserve act aggressively to stave off a recession, he said.

Fed Bank of Richmond President Jeffrey Lacker said today he is more ``willing'' to consider additional interest-rate cuts. Fed Chairman Ben S. Bernanke said yesterday the central bank is ready to take ``substantive additional action'' to help the economy.

On the LME, copper for delivery in three months gained $139, or 2 percent, to $7,130 a metric ton ($3.23 a pound). The price rose to a record $8,800 a ton in May 2006.

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

Last Updated: January 18, 2008 12:34 EST