copper hits 6 week high

Copper Prices Climb to Their Highest in Weeks

By TATYANA SHUMSKY

Copper prices settled near six-week highs Wednesday but pulled back from earlier peaks, as worries about the future of the Federal Reserve's monetary stimulus tempered the supportive influence of stronger U.S. home-sales data and disruptions to the copper supply.


The most actively traded contract, for July delivery, settled 3.70 cents, or 1.1%, higher at $3.3805 a pound on the Comex division of the New York Mercantile Exchange. That was the highest settlement price since April 11, when copper closed at $3.4335 a pound. The front-month contract, for May delivery, gained 3.85 cents a pound, to $3.3775.

Prices for the July contract touched a high of $3.4180 after Fed Chairman Ben Bernanke reiterated his support for the bank's bond-buying program and spoke of its success at reanimating economic growth and keeping deflation at bay.

But prices fell when Mr. Bernanke raised the prospect of cutting back on these measures in the next few months, should economic data warrant such a decision.

"This is the first sign that any of this stimulus could end," said Frank Lesh, a broker and futures analyst with FuturePath Trading.

The remarks "put a little bit of fear out there [as to] whether the market will hold up without this stimulus and what the economy will do. It's that uncertainty that makes people nervous," he said.

Copper is widely used in manufacturing and construction, and investors worry these sectors would suffer alongside the wider economy if the central bank removes its supportive measures before economic growth is sufficiently strong.

These worries have kept copper prices under pressure in recent months.

In April, copper futures entered a bear market, defined as a roughly 20% fall from recent highs, amid concerns that the metal supply from the world's mines would exceed demand from factories and other users in 2013.

Earlier in Wednesday's session, copper prices rose following the release of U.S. data showing existing-home sales climbed 0.6% in April from a month earlier, to their highest level in more than three years.

While the data fell short of forecasts of a 1.4% increase, the report still signaled the housing market is well on its way to recovery from the real-estate bust. The rallying housing market has kept the U.S. the world's second-largest copper consumer, behind top buyer China.

Copper prices also drew strength from reports that one of the world's largest copper mines will remain shut indefinitely in the wake of a fatal tunnel collapse in Indonesia.

PT Freeport Indonesia, which operates the Grasberg copper mine, said it still doesn't know when operations will resume in the wake of the May 14 collapse, which killed 28 workers.

The Indonesian accident occurred outside production areas, but Freeport halted all work in the area as it investigates the cause.

This is the third significant supply disruption this year, in the wake of a port strike in Chile and a wall slide at U.S. copper mine Bingham Canyon, and it is casting doubts on expectations of excess supply for 2013, analysts said.

Copper traders now turn their sights to China, with the release of a purchasing-managers index overnight.

The closely watched gauge of national factory activity is considered an indicator of copper demand from the world's largest consumer of the metal. China accounts for about 40% of the world's copper demand.

Write to Tatyana Shumsky at [email protected]