BASE METALS: Comex Copper Edges Higher On Inventory Declines

NEW YORK (Dow Jones)--Copper futures rose Friday as traders viewed recent declines and falling global stockpiles as an excuse to buy.

The most actively traded contract, for July delivery, recently traded 1.05 cent, or 0.3%, higher, at $4.0630 a pound on the Comex division of the New York Mercantile Exchange. Thinly traded May copper recently traded 1.1% higher, at $4.0925 a pound.

Since touching six-month lows last week, the industrial metal has rebounded above the $4 mark, supported by bargain buying and signs of steady physical demand from Asian buyers.

Copper stored at Shanghai Futures Exchange warehouses fell to its lowest levels since September 2010 this week, the ninth consecutive week of declines, the exchange said Friday. Market participants attributed the declines to improving demand from copper fabricators.

"The sharp reduction of SHFE stocks suggests the Chinese market is increasingly tightening," analysts with Commerzbank said Friday in a research note.

Declines in imports earlier this year led some market participants to worry that efforts by the world's largest copper consumer to stifle inflation were curbing the country's appetite for metals.

SHFE-housed copper stocks fell 15,357 metric tons on the week, to 90,108 as of Friday. Closely-watched stocks of bonded copper fell 3,385 tons to 30,609 tons.

Meanwhile, inventories of copper stored in London Metal Exchange warehouses, which had shown steady builds in recent weeks, fell Thursday. Stocks stood at 466,250 metric tons Thursday, down by 775 tons from Wednesday.

"We've been in the orbit of pretty much flat. (Copper) has been kind of choppy this week," said Zachary Oxman, managing director at TrendMax Futures. "I would like to say that it's rallying off of the fact that people are believing that an economic turnaround is coming, but the data from the U.S. has not been productive."

Readings on the U.S. housing and manufacturing sectors came in worse than expected this week, hitting sentiment in the copper market. The industrial metal is sensitive to changes in the economic outlook because of its widespread use in construction and manufacturing.

Copper futures have also taken cues from moves in currency markets recently, but were given less direction this week as the dollar moved indecisively. Like other dollar-denominated commodities, copper can fall when the greenback rises and makes the futures more expensive for market participants using other currencies.

The ICE U.S. Dollar Index, which measures the dollar against a basket of currencies of major U.S. trading partners, was recently at 75.505, up from 75.123 late Thursday in New York trading.

Source: http://online.wsj.com/article/BT-CO-20110520-708418.html