copper gains in new york

Copper Gains in New York as Dollar Weakness Spurs Metals Demand

By Millie Munshi

Oct. 23 (Bloomberg) -- Copper rose from a five-week low in New York on speculation that a declining dollar will boost demand by making the metal cheaper for buyers holding other currencies.

The dollar fell today against a basket of six major currencies, including the euro and the yen. The U.S. currency has dropped against the index for two consecutive weeks and fell to a record low against the euro yesterday. Copper, used in pipes and wires, had gained 22 percent this year while the dollar fell 7.2 percent against the index.

``The dollar weakening today has certainly encouraged some buying and added some support to the market,'' said David Meger, a senior analyst at Alaron Trading Corp. in Chicago.

Copper futures for December delivery gained 2.7 cents, or 0.8 percent, to $3.5135 a pound on the Comex division of the New York Mercantile Exchange. The metal dropped to $3.45 yesterday, the lowest for a most-active contract since Sept. 18.

The market was ``predominantly tracking the dollar today,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago.

Supply constraints will keep prices elevated through next year, John Hill, an analyst at Citigroup Inc. in San Francisco, said in a note today.

Mining companies including Rio Tinto Group and Teck Cominco Ltd. have reported lower copper production this year as strikes by workers disrupted supplies and producers mined lower-grade ore. BHP Billiton Ltd., the world's biggest mining company, reported growth in copper output today that missed some analysts' forecasts.

``Lower-than-expected supply has been the most important factor supporting prices,'' Hill said. ``It remains a key uncertainty, both in the short and long term.''

Supply Deficit

Copper supplies will lag behind demand by 3,000 metric tons next year, Citigroup forecasts. That compares with an estimated surplus of 57,000 tons this year. The metal will average $3.50 a pound next year, the bank estimates. Copper has averaged $3.25 this year in New York, according to Bloomberg data.

Analysts' forecasts for copper and other base metals may have to be raised, partly because of limits to supply growth, Evy Hambro, managing director of BlackRock Inc.'s World Mining Fund, said in a teleconference today from Melbourne. He didn't give price forecasts. The fund, which has about $10.2 billion in assets, is the world's largest metals fund.

``We see further issues in regards to lower levels of production from existing assets, and delays to new projects coming into production, versus strong and healthy demand,'' Hambro said. ``We expect to see a strong basis for prices over the next three to five years.''

Increasing inventories may limit the metal's gains through the end of they year, Meger of Alaron said. Stockpiles monitored by the London Metal Exchange gained 425 tons, or 0.3 percent today, to 151,525 tons. The supplies have gained 16 percent this month.

On the LME, copper for delivery in three months gained $35, or 0.5 percent, to $7,795 a 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: October 23, 2007 14:20 EDT