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Copper Extends Gains in London on Outlook for Increased Demand
Share Business ExchangeTwitterFacebook| Email | Print | A A A By Claudia Carpenter

Jan. 25 (Bloomberg) -- Copper prices extended gains in London on speculation that demand in Europe is strengthening and as some manufacturers take advantage of recent price declines.

European industrial orders increased 2.7 percent in November, more than initially estimated after the German government revised its data, a report from the European Unions statistics office in Luxembourg showed today. Inventories of copper in warehouses monitored by the London Metal Exchange dropped for a second day, signaling increased demand.

Were hearing good things about automobile demand in Europe, said David Thurtell, an analyst at Citigroup Inc. in London.

Copper for delivery on the London Metal Exchange rose $35, or 0.5 percent, to $7,425 a metric ton by 11:38 a.m. in London. The futures for delivery in March advanced 0.8 percent to $3.372 a pound on the Comex division of the New York Mercantile Exchange.

The metal extended gains today as the dollar fell as much as 0.4 percent against the euro, boosting demand for commodities as an alternative investment.

Prices of copper declined 1 percent the past two weeks as steps to slow growth in China, the worlds largest buyer of copper, heightened concerns that demand may weaken. There is a general feeling that copper is to be bought on a dip, said James Roberts, a broker at Sucden Financial Ltd. in London. Copper prices earlier today fell as much as 1 percent in London.

Middle East Demand

We had some Middle Eastern consumer buying this morning on the cable wiring side, said Herwig Schmidt, head of sales in London at Triland Metals Ltd., a trader on the LME. That was quite encouraging.

Inventories in LME-monitored warehouses fell 800 tons to 533,400 tons, according to the exchanges daily warehouse report today.

Chinas government has moved to rein in record lending that contributed to copper more than doubling last year. The central bank on Jan. 12 increased banks reserve requirements for the first time since June 2008.

In the U.S., the second-biggest buyer of copper, existing home sales probably dropped 9.8 percent in December, the month after a government tax credit was originally due to expire, economists said before an industry report today.

Everyones expecting something weaker because of the tax credit issue, Thurtell said.

Copper is often taken as an indicator for the world economy as it is used in construction and automobiles.

Best Pick

Copper remains the best pick among industrial metals as Chinas demand is expected to remain robust, Yu Yingxi, an analyst at Barclays Capital, said at a conference Jan. 23.

The metal may advance to a record $10,000 a ton this year, driven by industrial demand in China and buying to hedge against inflation, Shen Haihua, an investment manager at HFZ Capital Management Ltd., said at the same conference in Shanghai. Prices climbed to a record $8,940 in July 2008.

Zinc and lead last week settled more than 10 percent below their recent highs in January, the definition of a so-called correction. Zinc for delivery in three months was little changed at $2,350.50 a ton and lead advanced 1.4 percent to $2,267.25 a ton. Among other metals for delivery in three months, aluminum increased 0.7 percent to $2,247 a ton, nickel added 0.6 percent to $18,411 a ton and tin jumped 0.7 percent to $17,890 a ton.

To contact the reporter on this story: Claudia Carpenter in London at [email protected].

Last Updated: January 25, 2010 07:10 EST

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