Copper Advances for Second Day on Speculation Supply May Lag Behind Demand

Copper climbed for a second day, trading near a 26-month high, on speculation supply may lag behind demand as the consumption outlook improves in China, the world’s largest user. Nickel advanced to a five-month high. 

Copper for three-month delivery on the London Metal Exchange gained as much as 0.8 percent to $8,162 a metric ton, and traded at $8,150 at 12:09 p.m. Singapore time. The contract rose as high as $8,178 a ton on Oct. 1, the highest level since July 22, 2008. Futures for December-delivery on the Comex in New York added as much as 0.6 percent to $3.7140 a pound. The Shanghai Futures Exchange is closed till Oct. 7 for the National Day holiday. 

China will address “structural problems” and stabilize its economy by increasing domestic demand, Premier Wen Jiabao said in an interview with CNN yesterday. Wen also said he’d argued before the global recession that China’s economic development “lacks balance, coordination and sustainability.” 

“China is still either not contributing very much or is a drag on global apparent demand growth for metals at the moment, but this is unlikely to last given the current levels of demand in end-use sectors, for which growth is set to remain robust,” Macquarie Group Ltd. analysts including Jim Lennon wrote in a Oct. 4 report. “This should mean that China is again likely to increase apparent demand whilst the rest of the world is slowing.” 

Refined copper output will lag behind demand by 435,000 metric tons next year, the first shortage since 2007, according to the International Copper Study Group. The surplus is estimated at 200,000 tons this year and 166,000 tons for 2009, it said on Oct. 1. 

Inventories monitored by the London Metal Exchange, down 26 percent this year, are at the lowest level since Nov. 3. Copper stockpiles tallied by the Shanghai Futures Exchange dropped to the lowest level in more than a year last week. 

Aluminum and zinc in London were little changed at $2,356 a ton and $2,230 a ton respectively. Nickel climbed as much as 0.9 percent to $24,050 a ton, the highest price since May, lead gained 0.4 percent to $2,304 a ton and tin hadn’t traded as of 12:20 p.m. in Singapore. Source: Bloomberg