Copper Climbs for Second Day as China Rate Cut May Revive Usage

By Claudia Carpenter

Dec. 22 (Bloomberg) -- Copper advanced for a second day in London on speculation that China, the world’s largest user of industrial metals, will revive global demand with lower borrowing costs and a $586 billion spending program.

China’s central bank reduced interest rates today for the fifth time in three months. The government may need to rebuild stockpiles as manufacturers get funds to start work on housing, road, rail, power and rebuilding projects, according to Robin Bhar, an analyst at Calyon in London. China boosted copper imports for a third month in November, the customs office said.

“I’d be looking for the second half of 2009 for these measures to take effect,” Bhar said in a phone interview. China’s government State Reserve Bureau “is probably interested in restocking at some stage.”

Copper for delivery in three months climbed $26, or 0.9 percent, to $2,956 a metric ton as of 12:35 a.m. on the London Metal Exchange. Prices gained 1.7 percent on Dec. 19.

Inventories of the metal in warehouses monitored by the Shanghai Futures Exchange have declined 25 percent this year. The government is considering buying industrial metals to store as state reserves and help producers cope with the global economic slump, Wen Xianjun, deputy chairman of the China Nonferrous Metal Industry Association said Dec. 3.

Central banks from China to the U.S. and European Union have cut interest rates, aiming to stem damage from the most severe financial downturn since the Great Depression. Copper has dropped 56 percent in London this year, heading for its first annual decline since 2001 and worst performance on record.

‘Most Important Economy’

China’s stimulus package will support industrial metals more than other countries because its economy is still expanding, Bhar said.

“Even if it’s growing at 5 percent or 6 percent, that’s still higher than the U.S. or Europe,” he said. “Just on that basis, it’s probably the most important economy for metals.”

Refined metal imports rose 10 percent in November to 141,728 tons from 128,929 tons in October, according to the Beijing-based customs office.

Aluminum was little changed at $1,516 a ton. Production worldwide averaged 102,400 tons a day in November, down 3.6 percent from October, the International Aluminium Institute said today.

Zinc dropped 25 cents to $1,159.75 a ton and nickel declined $110 to $10,190 a ton. Tin rose $200 to $10,400 a ton and lead gained $33 to $884 a ton.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net or ccarpenter2@bloomberg.net