copper gains in new york on speculation chinese de

Copper Gains in New York on Speculation Chinese Demand May Rise

By Millie Munshi and Halia Pavliva

Jan. 8 (Bloomberg) -- Copper prices in New York rose the most in a month, halting a slump that sent prices tumbling in the first week of the new year, on speculation demand from China may gain.

The metal, used in pipes and wire, fell 12 percent last week, touching a nine-month low, as a slowdown in U.S. housing resulted in increased inventories. Copper has still gained 23 percent in the past year as mine accidents and labor disputes disrupted supplies.

``People came back on Monday and decided the sell-off was enough,'' said Patrick Chidley, an analyst at Barnard Jacobs Mellet LLC in Stamford, Connecticut. Demand may pick up as Chinese buyers come back to the market, he said.

Copper futures for March delivery gained 3.5 cents, or 1.4 percent, to $2.574 a pound at 11:08 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest one-day gain since Dec. 5. Futures more than tripled in the past five years as demand boomed from China, the world's largest consumer of the metal.

A futures contract is an obligation to buy or sell a commodity at a fixed price for delivery by a specific date.

Chinese Buyers

Chinese buyers may come back into the market after the Chinese New Year on February 18, UBS AG analysts said in a report today.

``We expect that the Chinese could begin to re-enter the copper market in early 2007,'' the analysts, led by Daniel Brebner, said. ``The spring period is a seasonally positive one for metals.''

On the London Metal Exchange, copper for delivery in three months rose $64, or 1.1 percent, to $5,675 a metric ton at 4:05 p.m. local time. Prices fell 11 percent last week.

Last week's drop was ``driven by hedge fund liquidation,''.

``Copper market fundamentals remain solid,'' Goldman Sachs analysts, led by Hongyu Cai, said in a report yesterday Inventories remain historically low, they said.

Stockpiles monitored by warehouses in London, Shanghai and New York have gained 55 percent in the last year, to 258,861 tons. That's still less than one week of global consumption, Goldman Sachs said.

Gains in the amount of LME copper stockpiles bought and due for future deliveries, known as canceled warrants, may be a signal that demand is picking up, the analysts said.

Canceled warrants more than doubled to 17,325 tons last week. The gain may be an indication that China is re-stocking inventories, Goldman Sachs said.