Copper Prices Gain to One-Week High on China Interest-Rate Cut

By Millie Munshi

Nov. 26 (Bloomberg) -- Copper prices rose to the highest in more than a week after China, the world’s biggest metals user, lowered interest rates to revive economic growth.

The People’s Bank of China reduced its key lending rate by the most in 11 years. A surge in demand by China, the biggest contributor to global growth, helped spur a six-year rally in copper futures. The metal climbed to a record in May.

“Prices are higher on account of the stimulus measures announced overnight from China,” Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said in a report. “We suspect values could stage another push higher.”

Copper futures for March delivery rose 3.75 cents, or 2.3 percent, to $1.6915 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $1.7335, the highest for a most-active contract since Nov. 14. The all-time high on May 5 was $4.2605.

The metal’s price was also boosted by the European Union’s announcement that it would coordinate a $259 billion stimulus proposal for the 27-nation economy.

“Governments are doing whatever they can to stimulate their economies,” said Ron Goodis, a retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey. “It’s helping to take out the panic that’s been in these markets and bringing money back in.

Copper has plunged 44 percent this year as the global recession reduced demand. The price is headed for the first annual decline since 2001, the last time the U.S. economy contracted.

Bearish Outlook

The slumping global economy still will hurt copper and other commodities, and prices won’t “bottom out” until the first half of 2009, the Australia & New Zealand Banking Group said. Raw materials may drop an additional 10 percent to 15 percent, the group forecast.

“I can’t see the base metals doing much,” Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York, said in an interview this week.

The Reuters/Jefferies CRB Index of 19 raw materials rose as much as 2.6 percent today, led by energy prices. On Nov. 21, the gauge touched the lowest level since April 2003.

“We don’t really know how long this recession is going to last, and the demand for the metals is not there,” Groenewegen said. “We have to look at stimulus plans as more of efforts just to stop the bleeding, not a reason to be bullish.”

On the London Metal Exchange, copper for delivery in three months rose $60, or 1.6 percent, to $3,755 a metric ton ($1.70 a pound).

To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net.