copper turn around

BLOOMBERG

Copper, Nickel Gain on Improved Demand Outlook, Supply Declines

By Millie Munshi

Nov. 21 (Bloomberg) -- Copper rose the most in five weeks, and nickel gained, after inventories of the metals declined and Swiss mining company Xstrata Plc forecast another decade of strong demand for commodities.

Stockpiles of copper monitored by the London Metal Exchange fell 0.06 percent, and nickel inventories fell to a two-week low. Xstrata executive Mark Sawyer said at a conference in London today that demand for commodities will remain ``very robust.'' Citigroup Inc. yesterday boosted its copper-price forecast after the metal had jumped 63 percent in the past year.

``There was a small decrease in stocks today,'' said Andrew Silver, a trader at London-based Natexis Commodity Markets. ``There were also some positive comments from Citigroup and Xstrata saying demand is going to stay fairly strong, giving some confidence back to the buyers.''

Copper futures for March delivery gained 7.9 cents, or 2.6 percent, to $3.1575 a pound at 10:45 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest gain for a most-active contract since Oct. 16.

The metal, used in wire and pipes, is still down 22 percent since reaching a record high in May, on speculation that mine output would exceed demand. The industry-funded International Copper Study Group yesterday said production in the eight months ended in August topped demand by 84,000 tons, compared with a shortfall of 233,000 tons a year earlier. The surplus in July was 26,000 tons and 7,000 in June.

Underinvestment in Mines

On the London Metal Exchange, copper for delivery in three months gained $120, or 1.7 percent, to $6,960 a metric ton at 3:46 p.m. Prices have gained 64 percent in the past year.

Underinvestment in mining will keep supplies tight, and demand from emerging economies, especially China, will boost prices of metals including zinc, nickel and copper, Sawyer said.

Nickel rose $800, or 2.6 percent, to $31,050 a ton on the LME. A close at that price would be the biggest gain on the most-active contract since Oct. 16.

LME-monitored inventories of the metal, used in stainless steel, fell 168 tons, or 2.4 percent, to 6,865 tons, the largest decline since Nov. 3, the exchange said. Prices have more than doubled in the past year as stockpiles dropped 68 percent.

``The supply situation seems to remain much tighter,'' said Donald Selkin, director of equity research at Joseph Steven & Co. in New York.

Also on the LME, aluminum rose $35 to $2,690 a ton, lead gained $15 to $1,535 a ton; tin rose $100 to $9,950 a ton and zinc gained $96 to $4,265 a ton.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.