Copper May Drop Next Week as Stockpiles Expand, China Slows By...

Copper May Drop Next Week as Stockpiles Expand, China Slows

By Chanyaporn Chanjaroen and Millie Munshi

Nov. 17 (Bloomberg) -- Copper may drop for a fifth consecutive week as expanding stockpiles of the metal and slowing demand growth in China increased speculation among traders that production will exceed consumption this year.

Twelve of 17 analysts, investors and traders surveyed by Bloomberg yesterday and Nov. 15 forecast copper will decline next week. Five expect a gain.

Stockpiles of the metal monitored by exchanges in London, New York and Shanghai are at 212,079 metric tons, taking this year's gain to 37 percent. Consumption in China, the world's largest user of the metal, may rise 5.6 percent this year, the lowest since 2000, according to China Minmetals Corp., the country's largest metals trader.

``The general supply-demand balance is continuing to shift toward a surplus,'' said Dan Vaught, an analyst at brokerage A.G. Edwards & Sons Inc. in St. Louis. ``If that is the case we will continue seeing inventories rise and ultimately force the market lower.''

Bloomsbury Minerals Economics, a London-based metals consulting company, said this week that supplies may exceed usage by 45,000 tons next year, revising a forecast that put supplies lagging behind demand by 130,000 tons. In 2006, supplies may fall short of demand by 235,000 tons, down from a forecast of 328,000 tons, Bloomsbury said.

Copper for delivery in three months on the London Metal Exchange dropped $58, or 0.9 percent, to $6,752 a metric ton as of 7:13 a.m. local time. It has fallen 2.4 percent this week.

On the Comex division of the New York Mercantile Exchange, copper for December delivery fell 0.2 percent to $3.035 a pound in after-hours electronic trading. Copper for delivery in January on the Shanghai Futures Exchange lost 1.3 percent to close at 61,880 yuan ($7,859) a ton. Chinese prices include 17 percent tax and 2 percent duty.

Domestic Output

Copper prices have declined 23 percent from a record $8,800 a ton on May 11. Chinese copper imports were 1.7 million tons in the first 10 months of the year, 22 percent less than a year earlier. Imports have been falling since October 2005.

``The domestic output increase this year has made up for an import drop,'' Shang Fushan, director of the copper department of the China Nonferrous Metals Industry Association, said yesterday. Domestic copper production may expand as much as 8.7 percent next year, Shang forecast.

Codelco, the world's biggest copper producer, faces a greater chance of a strike at Chuquicamata, its largest mine, after efforts to reach an early wage agreement failed, said Hector Roco, a union director. Codelco, owned by the Chilean government, has until the end of the year to reach an agreement with workers to avert a strike.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at [email protected] or; Millie Munshi in New York at [email protected] .