copper gains

as Inventory Tumbles 9.7% in Week, Most Since 2005

By Millie Munshi

Feb. 15 (Bloomberg) -- Copper rose the most in a week after inventories monitored by the London Metal Exchange tumbled 9.7 percent this week, the most since October 2005.

Stockpiles dropped 4,000 metric tons today and 16,100 tons from a week earlier to 150,650 tons, daily data from the exchange showed. Supplies have slid 24 percent this year, helping to drive the copper price up 16 percent.

The ``whopping'' decline in LME stocks ``is underpinning the market,'' Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said in a report.

Copper futures for May delivery gained 3.85 cents, or 1.1 percent, to $3.539 a pound on the Comex division of the New York Mercantile Exchange, the biggest percentage gain since Feb. 8. The most-active contract was little changed for the week, after climbing 11 percent the previous two weeks.

The amount of LME inventory earmarked for withdrawal, called canceled warrants, has gained almost fivefold since the start of the year, indicating stockpiles may continue to fall.

Still, an increase in supplies in China may be signaling that metal is being shifted from warehouses in London, rather than being used by consumers, traders said. Inventories monitored by the Shanghai Futures Exchange jumped 54 percent to 31,188 tons, a weekly report showed today.

Copper also climbed today as the dollar fell to the lowest in more than a week against the euro.

A declining dollar drives up demand for all commodities as investors buy raw materials as a hedge against inflation, said Robert Fullem, vice president of U.S. corporate foreign- exchange sales in New York at Bank of Tokyo-Mitsubishi.

``Commodities are a big item right now because of dollar weakness,'' Fullem said.

The U.S. currency fell to $1.4669 per euro from $1.4643 yesterday, after reaching $1.4709, the weakest since Feb. 5.

On the LME, copper for delivery in three months gained $50, or 0.7 percent, to $7,730 a metric ton ($3.51). The metal rose to a record $8,800 a ton in May 2006.