Copper Rises From 33-Month Low on Government Support for Banks

By Chanyaporn Chanjaroen

Oct. 13 (Bloomberg) -- Copper climbed from a 33-month low in London as stock markets rebounded after governments in Europe agreed to support banks. Aluminum also advanced.

The MSCI World Index of global stocks advanced 2.3 percent. The index and copper plunged 20 percent last week on concern about slowing global growth. European leaders yesterday agreed to guarantee new bank debt and use taxpayer money to keep distressed lenders afloat.

``The announcement by Europe helped lift the sentiment,'' Eliane Tanner, a commodity analyst at Credit Suisse Group, said by phone from Zurich. ``From the fundamental point of view, prices should be trading higher.''

Copper for delivery in three months rose $140, or 2.9 percent, to $4,930 a metric ton as of 1:02 p.m. on the London Metal Exchange. The contract has lost 45 percent from a record $8,940 on July 2.

The LME index tracking six metals has declined 38 percent since the start of the second half on concern that the financial crisis and slowing world economy will shrink demand.

The International Monetary Fund's World Economic Outlook last week said world economic expansion will slow to 3 percent in 2009, from 3.9 percent this year and 5 percent in 2007.

Goldman Sachs Group Inc. lowered its price forecasts for most commodities today, except gold.

``We have underestimated the depth and duration of the global financial crisis and its implications on economic growth and commodity demand,'' the bank said in a report.

Net-Short Positions

Hedge-fund managers and other large speculators increased their net-short position, or bets on price declines, by 16 percent to 18,799 contracts in New York copper futures in the week ended Oct. 7, according to U.S. Commodity Futures Trading Commission data. That's the largest net-short positions since March 2007.

BHP Billiton Ltd. declared force majeure allowing the company to miss copper concentrate deliveries from its Escondida mine in Chile, the world's largest, after an equipment failure curbed output. Concentrate is a semi-processed material that is smelted into metal.

Melbourne-based BHP on Oct. 10 said output of Escondida would fall 10 percent through next July because of the problems. Minera Escondida may require nine months to fix electrical failures at a mill, the company said. Production at Escondida has fallen this year because of lower-quality ore.

Tin Exports

Indonesia, the world's largest tin exporter, said it may produce less of the refined metal this year than previously forecast as the price declines.

``We expected 100,000 tons of output but it may only be 86,000 tons,'' Bambang Setiawan, director general of coal and mineral resources, told reporters in Jakarta today. ``We will see if we have to cut production to below 80,000 tons to maintain prices amid a global crisis.''

Tin fell $100, or 0.7 percent, to $14,000 a ton.

Lead consumption growth will slow to 4 percent next year to 8.99 million tons, from a growth of 5.7 percent expected this year, the Lisbon-based Lead and Zinc Study Group said today. Zinc demand will rise 3.8 percent in 2008, slowing to 3.3 percent at 11.78 million tons next year, it said.

Aluminum gained $40, or 1.8 percent, to $2,255 a ton and nickel rose $494, or 4.1 percent, to $12,669. Lead added $60, or 4.1 percent, to $1,535 and zinc gained $30, or 2.1 percent, to $1,480 a ton.

To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net