Copper Falls for Second Day as Stockpiles Fuel Demand Concern

Copper fell for a second day in London as expanding inventories of metal fueled concern about weakening demand.

Stockpiles monitored by the London Metal Exchange rose to the highest level since Aug. 16, while inventories tracked by the Shanghai Futures Exchange were at the highest since June as of last week. Copper also slid before a report that may show slower growth in industrial production in the U.S., the world’s second-largest copper consumer after China.

“Prices are off slightly this morning, as the market appears unable to decide in what direction the U.S. industrial- production data will go later today,” Fairfax IS said in a report.

Copper for three-month delivery slid $62, or 0.6 percent, to $9,949 a metric ton at 10:28 a.m. on the LME. Copper for May delivery was little changed at $4.544 a pound on the Comex in New York.

Ebbing demand may be feeding stockpile gains as higher prices encourage substitution, said Nic Brown, an analyst at Natixis Commodity Markets Ltd. in London. LME copper inventories are up 7.5 percent this year.

Today stockpiles climbed 0.8 percent to 405,800 tons, with the biggest gains in warehouses inSingapore and South Korea, daily exchange figures showed. Orders to draw copper from stocks, or canceled warrants, jumped 23 percent, the most since Jan. 10, to 13,575 tons.

Demand From China

“I would certainly expect canceled warrants to push higher in the post-Chinese New Year period,” Brown said. “Chinese demand typically takes a few weeks to pick up steam, so stockpiles can increase in the near term.”

Markets in China were shut for a week through Feb. 8 for the Lunar New Year holiday.

Output at U.S. factories, mines and utilities increased 0.5 percent after a 0.8 percent gain in December, according to the median forecast of 80 economists surveyed by Bloomberg News. The figures are due at 2:15 p.m. London time today.

Zinc for three-month delivery on the LME gained 1.1 percent to $2,518 a ton and tin advanced 0.2 percent to $32,570 a ton. Aluminum added 0.3 percent to $2,513 a ton, lead fell 0.2 percent to $2,629 a ton and nickel was little changed at $28,730 a ton.

(Source: http://www.bloomberg.com/news/2011-02-16/copper-falls-as-expanding-stockpiles-fuel-concern-demand-may-be-weakening.html)