Copper Jumps to One-Week High as Obama Stimulus Spurs Optimism

By Glenys Sim

Jan. 19 (Bloomberg) -- Copper climbed to a one-week high, pacing a rally in industrial metals, on optimism U.S. president- elect Barack Obama's stimulus package will lift the world's largest economy out of a recession.

Obama will focus more on helping consumers, local governments and businesses than banks as his administration deploys the second half of the $700 billion rescue fund, according to Lawrence Summers, the president-elect's top economic adviser. The metal also gained after a Jiangxi Copper Co. executive said China would buy the raw material overseas.

``There's a lot of optimism built into these prices,'' Song Libo, research manager at Capital Futures Co., said from Beijing today. ``We cannot discount the fact that so much of the data coming out is still bad. Prices will continue to face downside risks as demand weakens and stockpiles build.''

Copper advanced as much as 3.6 percent to $3,475 a metric ton on the London Metal Exchange, the highest since Jan. 12. It traded at $3,410 at 3:48 p.m. in Singapore, extending the 2.3 percent increase Jan. 16.

Metal for April delivery gained as much as 3.5 percent to 28,420 yuan ($4,157) a ton on the Shanghai Futures Exchange and ended the day at 27,930 yuan.

China, the world's biggest metals consumer, will buy copper overseas to boost state stockpiles, said Wang Chiwei, Jiangxi Copper executive director and vice president, at a conference in Shanghai today. Purchases would ``suit national interests. The question is when and how to buy it.''

`Attractive' Prices

Prices are ``attractive,'' said Wang. The bureau would adopt a ``flexible'' approach and the purchases wouldn't be made all at once, he said.

The State Reserve Bureau is buying zinc and aluminum from local smelters to support the industry as the economy probably expands at the slowest pace in seven years. The agency is ``unlikely'' to buy copper from local smelters, Wang said. The country had discarded a plan to buy the metal because producers were profitable and inventories weren't high, government and company officials said this month.

``The price differential between Shanghai and London now makes imports profitable,'' said Li Rong, chief analyst at Great Wall Futures Co. ``I don't think anyone ruled out the possibility of the state making overseas purchases.''

China Import Jump

Imports of copper and alloys by China jumped 62 percent in December from the previous month, preliminary customs data showed Jan. 15. Imports in calendar 2008 declined 1.3 percent from the previous year to 1.7 million tons.

Inventories monitored by the London Metal Exchange climbed to a five-year high of 391,525 tons on Friday. Stockpiles in Shanghai warehouses fell 30 percent, the most in almost a year, to 15,871 tons last week, before the Lunar New Year next week.

Among other LME-traded metals, aluminum gained 0.5 percent to $1,471.75 a ton, zinc added 1.2 percent to $1,266.5, nickel rose 2.3 percent to $11,100, and tin was up 2.3 percent at $11,150. Lead fell 1.2 percent to $1,155 a ton by 4:06 p.m. in Singapore.

To contact the reporter for this story: Glenys Sim in Singapore at gsim4@bloomberg.net