Copper May Have First Weekly Gain in Three on Arbitrage Trading

By Li Xiaowei

Sept. 12 (Bloomberg) -- Copper gained for a third day in London, heading for the first weekly gain in three, as investors step up arbitrage trading to take advantage of the price gap between London and Shanghai.

Copper has fallen 22 percent from the July peak of $8,940 a ton in London, as increasing stockpiles signaled weaker demand and a rebound in the U.S. currency reduced dollar-priced investments. Shanghai prices have declined 13 percent

``The price gap provides opportunities for arbitrage,'' or buying London and selling Shanghai, Wang Zhouyi, an analyst at China International Futures (Shanghai) Co., said today by phone from Shanghai. ``Yet strength in the dollar may impede the arbitrage because it reduces appeal of commodities investments.''

Copper for three-month delivery rose as much as 0.7 percent to $6,980 a ton on the London Metal Exchange and traded at $6,961 at 10:10 a.m. in Shanghai. Metal for December delivery rose 1.5 percent to $55,380 yuan ($8,091) a ton on the Shanghai Futures Exchange at the same time.

The U.S. currency was little changed from yesterday, after touching $1.3882, the strongest level since Sept. 18, 2007.

Among LME-traded metals, aluminum was 0.2 percent up at $2,625 a ton, zinc dropped 0.6 percent to $1,784, tin declined 1.5 percent to $18,500, lead and nickel were un-traded in Asia after settling at $1,855 and $18,500 yesterday.

To contact the reporter for this story: Li Xiaowei in Shanghai at Xli12@bloomberg.net