going nuts...

Copper Gains in London on Speculation Demand to Outpace Supply

By Katy Watson

Sept. 5 (Bloomberg) -- Copper gained in London on speculation supply won't keep pace with growing demand as manufacturers increase consumption of the metal used in construction after the mid-year vacation period.

The pick-up in demand after the summer period in Europe and North America may mean copper demand exceeds supply, according to a report by Norddeutsche Affinerie AG. While global copper stockpiles climbed 23 percent to 189,462 tons since the end of July, inventories remain ``seasonally low,'' said John Meyer, an analyst at London-based Numis Securities Ltd.

``There is concern that this is insufficient to meet new demand as manufacturers ramp up production into the autumn,'' said Meyer.

Copper for delivery in three months on the London Metal Exchange rose $180, or 2.4 percent, to $7,830 a metric ton as of 12:50 p.m. in London. The metal has gained 78 percent this year.

Workers at Chile's Escondida, the world's biggest copper mine, returned to work Sept. 2 after a strike that lasted nearly four weeks and halved production. Further wage negotiations later this year at mines including Chile's state-owned Codelco may help to keep prices high, said Meyer.

``Demand is the key to the current market, with the potential supply disruption being the catalyst to continuing high prices,'' he said. ``The supply deficit looks likely to continue for the next six to 12 months.''

Copper has dropped 11 percent from its May 11 high of $8,800 a ton, partly on concern that rising global interest rates may slow economic growth and curb demand for metals. China, the world's biggest copper consumer, on Aug. 18 raised its key rate in an effort to rein in growth. The economy grew 11.3 percent in the second quarter, the most in more than a decade.

Chinese Juggernaut

``They are tinkering at the edges, I don't think they are in danger of grinding that juggernaut to a halt,'' said Sean Corrigan, chief investment strategist at Lausanne, Switzerland- based Diapason Commodities Management SA.

Also on the LME, aluminum gained $66 to $2,556 a ton, nickel added $1,100 to $28,700, lead was $22 higher at $1,280, tin rose $45 to $9,095 and zinc advanced $133 to $3,608.

``Labor Day traditionally marks the end of summer and as we move further into September we expect industrial activity to continue to pick up and with it the return of physical buying,'' said Robin Bhar, an analyst in London at UBS AG said in a report. ``Supply demand fundamentals remain strong for most metals.''