copper 1.3lb, page-4

Interesting Article.

Stock pile up 19% this year and still < 3 days global usage !

See below:

Copper Gains on Speculation That Demand Will Outpace Supply
May 25 (Bloomberg) -- Copper rose on the London Metal Exchange on speculation that production may not meet demand this year because of strikes and declining output at some mines.

Mexican miners yesterday began a blockade at Grupo Mexico SA's Cananea copper mine, the country's largest. There's been a strike at La Caridad mine, Mexico's second-biggest, for two months. Codelco, the world's No. 1 copper producer, yesterday warned production will decline this year and next. Demand will rise 5.2 percent this year, HSBC Holdings Plc said yesterday.

``The fundamentals of copper are very supportive,'' Roy Carson, a London-based metals analyst at Triland Metals Ltd., which trades on the floor of the LME, said today by phone. ``Codelco will produce less and strikes are still on.''

Copper for delivery in three months on the LME advanced as much as $150, or 1.9 percent, to $7,980 a metric ton. The contract was $140 higher at $7,970 as of 9:26 a.m. in London, taking its gain this year to 81 percent. Copper reached a record $8,800 May 11.

Codelco, which supplies about 11 percent of the world's copper, yesterday said its output this year will be 1.713 million tons, or 0.6 percent less than last year. Production next year will be 1.652 million tons, Codelco forecast.

Copper prices have also gained because of increased interest from hedge, index-tracking and pension funds.

U.S. and European pension funds have shifted about 5 percent to 10 percent of their assets out of stocks and bonds into commodities indexes over the last several years, John Tumazos, a New York-based analyst at Prudential Equity Group, said in an interview yesterday.

Copper Forecast

HSBC, Europe's largest bank by market value, raised its average copper price forecast for this year by 40 percent to $2.80 a pound.

``High metal prices reflect ongoing inflows of speculative money,'' HSBC analysts led by Paul McTaggart said in a report yesterday. The bank estimates about $100 billion will be invested in commodity indexes by the end of 2006, compared with $10 billion at the end of 2003.

Copper inventory monitored by the LME fell 475 tons, or 0.5 percent, to 105,750 metric tons, the exchange said today in a daily report. Stockpiles, which have risen 19 percent this year, are still equal to less than three days of global usage.