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    Copper Rises on Speculation About Recovery in Manufacturing

    By Anna Stablum

    Aug. 3 (Bloomberg) -- Copper rose to a 10-month high in London on speculation that demand will be buoyed by a recovery in manufacturing in China and the U.S., the worlds two largest consumers of the metal.

    Chinese manufacturing expanded in July as record lending and an economic-stimulus package drove a recovery. The CLSA China Purchasing Managers Index rose to the highest level in a year. A report today probably will show that U.S. manufacturing shrank in July at the slowest pace in 11 months as the recession eased, according to economists surveyed by Bloomberg.

    Chinese industrialization is coming back again, Brock Salier, an analyst at Ambrian Partners Ltd. in London, said by phone. Underlying fundamentals are still strong.

    Copper for three-month delivery on the London Metal Exchange added $201, or 3.5 percent, to $5,920 a metric ton by 10:20 a.m. local time after touching $5,946.75, the highest since Oct. 3. The metal for September delivery gained 7.85 cents, or 3 percent, to $2.702 a pound on the New York Mercantile Exchanges Comex division.

    Copper has jumped 92 percent this year on the LME, helped by first-half Chinese imports that more than doubled. Stockpiles of the metal in warehouses monitored by the exchange have dropped 49 percent from this years peak on Feb. 25 as metal was shipped to China.

    Larger Stockpiles

    Inventories rose for a second day today, gaining 0.5 percent to 282,125 tons, and are up almost 10 percent from this years low on July 14. Copper has climbed too high, Ambrians Salier said.

    In the short term, prices have run a bit too far and they might be due a correction, he said.

    Prices gained today as the MSCI World Index of shares added as much as 0.9 percent, advancing for a third day. The U.S. economy may expand by 2.5 percent in the current quarter, former Federal Reserve Chairman Alan Greenspan said yesterday on ABCs This Week. There are signs the recession is easing, Treasury Secretary Timothy Geithner said on the program.

    Hedge-fund managers and other large speculators decreased their net-short position, or bets on lower prices, in New York copper futures in the week ended July 28, according to U.S. Commodity Futures Trading Commission data. Net-short positions fell by 1,485 contracts, or 9 percent, from a week earlier.

    Aluminum, Tin

    Among other LME metals for three-month delivery, aluminum gained as much as 2 percent after posting its best monthly performance in July since May 1988. Zinc, lead and nickel rose to the highest since September, and tin climbed the most since November.

    Aluminum advanced $31, or 1.6 percent, to $1,921 a ton, extending Julys 16 percent climb. LME-monitored inventories rose to a record 4.6 million tons today.

    Much of the stock is being held in financing deals, effectively tying it up, Max Layton, an analyst at Macquarie Bank Ltd. in London, said in a report today. The bank forecasts surpluses for the lightweight metal from this year through to 2011, when it expects a balanced market.

    Zinc added 3.8 percent to $1,817 a ton. Macquarie expects the metal to remain around current levels in the fourth quarter, with some upside potential, Layton said.

    Lead gained 2.3 percent to $1,922 a ton, nickel advanced 3.3 percent to $18,550 a ton, and tin rose 9.4 percent to the days peak of $14,775 a ton.

    To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net.

    Last Updated: August 3, 2009 05:37 EDT

    http://www.bloomberg.com/apps/news?pid=newsarchive&;sid=auggLNiwZ_Vo

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