Copper Market could exceed $1.50.Copper Surges to Highest in Almost 7 Months on Supply Concern
By Choy Leng Yeong
Sept. 29 (Bloomberg) -- Copper prices in New York rose to
the highest in almost seven months on expectations that demand
will outpace production, eroding global inventory that plunged 84
percent in the past year.
Stockpiles monitored by the London Metal Exchange fell 450
metric tons to 93,825 tons today. Prices rose to a six-month high
on Sept. 27 after supplies plunged 3.7 percent, the most since
April 1997. The inventory decline has helped push copper prices
up 69 percent in the past year.
``Falling copper stocks are making business good and making
copper attractive for the funds,'' said Steve Solomon, president
of Lynn, Massachusetts-based Solomon Metals Corp., which supplies
recycled copper to brass mills and refineries. ``The stars seemed
aligned in the right direction'' for physical and investment
demand, he said.
Copper futures for December delivery rose 2.35 cents, or 1.7
percent, to $1.393 a pound on the Comex division of the New York
Mercantile Exchange. Prices reached $1.396, the highest for a
most-active contract since March 2, when the metal hit an eight-
year high of $1.403.
Speculators increased holdings in futures for a third week
to the highest since March 16, the U.S. Commodity Futures Trading
Commission said Sept. 24.
Hedge funds and other large speculators bought 19,517 more
contracts than they had sold as of Sept. 21, up 29 percent from
the week before, the commission said.
A futures contract is an agreement to buy or sell a
commodity at a specified price and date.
`New Money'
``We still seeing withdrawals in LME stocks,'' said Michael
Guido, director of hedge fund marketing and commodity strategy in
New York for France's Societe Generale SA. ``There is new money
coming into the market'' from funds, he said.
Global copper demand is expected to surpass production and
scrap supplies by 701,000 tons this year, almost double last
year's deficit of 376,000 tons, forcing manufacturers to dig
deeper into stockpiles, the Lisbon-based International Copper
Study Group said last week. Production exceeded demand in 2002
and 2001, when prices plunged to a 14-year low.
``Over the last month or so, we have seen the Chinese come
back into the market,'' Solomon said. ``We getting more offers
from Chinese customers. The housing industry has been very
strong.''
Home prices in 35 major cities of China, the world's biggest
copper user, rose by an average 10 percent from a year earlier in
the second quarter, led by a 21 percent increase in Shanghai, the
National Development and Reform Commission said on July 26. In
the first quarter, home prices rose 4.8 percent, the commission
said.
`New Building'
``There's a lot of building going on in China,'' Solomon
said. ``I was there back in January, and everywhere we turned,
there was a new building.''
The U.S. housing sector also is ``strong,'' Solomon said.
Sales of new homes in the U.S., the second-largest copper user,
surged 9.4 percent in August, boosted by the lowest mortgage
rates in four months, the Commerce Department said.
Builders are the biggest users of copper, accounting for 40
percent of demand. An average single-family home contains about
400 pounds of the metal, according to the Copper Development
Association, a New York-based industry group.
``The market seems in position to surpass $1.50,'' Solomon
said.
--Editor: McKiernan