Morgan Stanley very Bullish on CopperCopper Rises From 3-Month Low; Speculation Usage to Beat Supply
By Chanyaporn Chanjaroen
https://www.bloomberg.com/apps/news?pid=20601086&sid=as1pUjKpcEbo&refer=latin_america
Oct. 5 (Bloomberg) -- Copper rose from a three-month low in London on speculation that demand for the metal used in wires and pipes will exceed supply, underpinned by economic growth in China and Europe.
A price rally in commodities including copper will continue this quarter, driven by purchases from China, the world's largest consumer of most industrial metals, Morgan Stanley said today in a report. Copper will retest the record high of $8,800 a metric ton traded on May 11 before the end of this year as the market will be in a supply shortfall of 110,000 tons, Morgan Stanley, the world's biggest securities firm, said in the report.
``The copper industry faces unprecedented pressure in keeping pace with global demand growth,'' analysts led by Wiktor Bielski in London wrote.
Copper for delivery in three months gained $135, or 1.9 percent, to $7,165 a ton on the London Metal Exchange as of 9:26 a.m. The contract declined 4.2 percent yesterday to $7,030 a ton, the lowest closing price since June 28.
Copper has fallen 17 percent from its record high. Prices dropped after central banks in the U.S., Europe and Japan raised interest rates, triggering speculation global economic growth will slow next year, curbing demand for commodities including industrial metals.
`Fears Overdone'
``These fears are overdone,'' Morgan Stanley analysts said. An increase in business spending in Asia and Europe will cushion the effects of a U.S. housing slowdown, they said.
Producers of wires and pipes bought the metal today, Rick Holmes, managing director at Mitsui Bussan Commodities (Australia) Pty Ltd. said.
``Consumers of copper woke up this morning and saw the price was lower and said, 'Good, I will buy some,' because yesterday it was a lot more expensive,'' Holmes said today by telephone from Sydney.
Falling inventories of metals indicate demand. Copper stockpiles tracked by the LME dropped 2,550 tons, or 2.2 percent, to 114,425 tons, the exchange said today. That's less than three days of global consumption.
Lead inventory slumped for an eight straight business day, bringing total decline since Sept. 25 to 20 percent at 52,800 tons, according to LME data. That's less than three days of global consumption estimated at 7.6 million tons last year by the Lisbon-based International Lead and Zinc Study Group.
Prices of lead in London gained $38, or 2.8 percent, to $1,390 a ton. Earlier, they rose as much as 3.6 percent to $1,400 a ton, close to the record of $1,435 a ton traded on Feb. 3.
Nickel gained $725, or 2.6 percent, to $28,800 a ton, and aluminum rose $13 to $2,488. Tin advanced $200, or 2.3 percent, to $9,100 a ton and zinc increased $51, or 1.5 percent, at $3,355 a ton.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net .
Last Updated: October 5, 2006 04:31 EDT