Copper Leads Metals Higher in London on Expectations for Demand...

Copper Leads Metals Higher in London on Expectations for Demand

By Brett Foley and Chanyaporn Chanjaroen

Oct. 23 (Bloomberg) -- Copper rebounded from a one-month low in London, leading other industrial metals higher, as investors judged prices no longer reflected the outlook for demand.

The possibility of further interest rate cuts in the U.S. and economic growth in China is buoying expectations for demand, said Michael Jansen, a London-based metals analyst at JPMorgan Securities Ltd. China and the U.S. are the two largest users of copper and other industrial metals.

``The demand side is still healthy and we could see a strong first half next year if consumers are forced to restock,'' Jansen said by phone. Still, ``the risks will be acute if that restocking doesn't happen.''

Copper for delivery in three months on the London Metal Exchange increased $71, or 0.9 percent, to $7,831 a metric ton as of 12:15 p.m. local time. Prices are heading for a sixth consecutive annual gain. Goldman Sachs Group and Barclays Capital are among banks forecasting that prices will return to the record $8,800 a ton reached in May last year.

Investors are betting that the U.S. Federal Reserve will follow September's half-point interest-rate cut with another quarter-point reduction. China's economy expanded 11.9 percent in the second quarter, the fastest pace in almost a decade.

Copper stockpiles in warehouses monitored by the LME rose 425 tons, or 0.3 percent, to 151,525 tons. Inventories have risen 16 percent this month to the highest since May 3.

Inventories monitored by exchanges in London, New York and Shanghai are at 233,162 tons, their highest since June, according to Bloomberg calculations. That's equal to about five days of global demand, up from 4.2 days at the start of this month.

Canceled Warrants

Nickel bought and earmarked for delivery out of LME- registered warehouses jumped 49 percent to 1,212 tons. The increase in the so-called canceled warrants typically indicates improved demand.

About two-thirds of nickel is used as an alloy in stainless steel. Demand for the steel started to pick up in late September, Outokumpu Oyj, the world's fourth-largest maker of stainless steel, said today after reporting a third-quarter loss.

``The order book has been gradually improving,'' the company said today in a statement.

Nickel added $300, or 0.9 percent, to $32,050 a ton.

Lead rose $63, or 1.8 percent, to $3,653 a ton, after dropping 3.1 percent yesterday. The metal, used in car batteries, traded at a record $3,890.15 a ton on Oct. 10.

The metal had a deficit of 84,000 tons in the first eight months of this year as demand expanded 4.4 percent, the Lisbon- based International Lead and Zinc Study Group said today.

Zinc had in a production shortfall of 28,000 tons in the same period, the group said. The metal gained $56, or 1.9 percent, to $2,936 a ton on the LME.

Aluminum gained $3 to $2,530 a ton and tin was unchanged at $16,250 a ton.

To contact the reporters on this story: Brett Foley in London at [email protected] or; Chanyaporn Chanjaroen in London at [email protected]

Last Updated: October 23, 2007 08:28 EDT