Thursday, 7 April 2011
Copper Gains for Third Day as Rio Fuels China Demand Speculation
Copper rose for a third day in New York as Rio Tinto Group became the latest producer to stoke speculation that demand will maintain its pace in China, the world’s largest consumer of the metal.
Copper usage in China and other emerging markets will gain more quickly than output, prompting a global deficit, according to Rio, which mines for the metal in places from the U.S. to South Africa. Freeport-McMoRan Copper & Gold Inc. said this week it’s “very confident” about Chinese demand, even as the country raises interest rates to curb inflation.
“The Chinese have put aside the benchmark interest-rate hike the other day,” said Steve Hardcastle, head of client services for industrial commodities at Sucden Financial Ltd. in London. “The market is still anticipating the Chinese physical activity picking up a little bit.”
Copper for May delivery advanced 5.8 cents, or 1.3 percent, to $4.428 a pound at 8:06 a.m. on the Comex in New York. Prices reached $4.437, the highest level since March 25. Copper for three-month delivery climbed 1.4 percent to $9,736 a metric ton on the London Metal Exchange. Nickel led gains as all of the six main metals traded on the LME rose.
The copper shortage this year may rise to between 400,000 and 500,000 tons, Andrew Harding, head of Rio’s copper business, said yesterday in an interview. The global market is set for an 800,000-ton deficit, Paul Horsnell, head of commodities research at Barclays Capital, said last month.
Inflation in China
China’s central bank on April 5 raised lending and deposit rates by a quarter point, the fourth increase in less than six months. It acted before a report forecast to show consumer prices climbed 5.2 percent last month from a year before, the fastest pace since 2008.
The European Central Bank today lifted interest rates for the first time in almost three years to quell inflation, even as Portugal became the third nation to succumb to the region’s sovereign debt crisis. The ECB raised its benchmark interest rate by a quarter-point to 1.25 percent
“Given broad expectations of a hike already, the market would look at signs whether this is a one-off increase, or the start of a broader rate hike cycle,” analysts at Standard Bank Plc said in a report before the ECB announcement. “If there are signs of the latter, possible dollar weakness, vis-a-vis the euro may provide some downside support to commodities.”
Stockpiles Increase
LME copper inventories rose 1,500 tons to 442,375 tons, daily exchange figures showed. They’re up 27 percent from the 2010 low on Dec. 10. Orders to draw metal from stockpiles, or canceled warrants, gained for the first time in 10 days to 9,775 tons.
Nickel for three-month delivery on the LME climbed 2.9 percent to $27,198 a ton after reaching $27,450, the highest price since March 8. Cash metal traded at a premium of as much as $10 a ton to the three-month contract today, the highest level since Oct. 1. The so-called backwardation, which was last at $6, may signal supply concern.
A single party held 50 percent to 79 percent of LME nickel stocks as of April 5, exchange figures showed.
Lead, zinc, tin and aluminum also rose in London.
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