Copper Heads for Second Weekly Drop as Global Inventories Grow

By Glenys Sim

Feb. 20 (Bloomberg) -- Copper declined, heading for its second weekly loss, on concern a climb in global stockpiles to their highest in more than five years showed demand was waning.

Inventories in LME-registered warehouses advanced to 528,250 metric tons yesterday, the highest since October 2003. Stockpiles in Shanghai are said to have jumped about 8,000 tons this week, according to GF Futures Co.’s Liu Biyuan. The exchange will publish the data after the market closes today.

“There is little reason to get over-excited about the recent price rally as there are no indications of demand recovering as yet,” London-based researcher VM Group said in a monthly report published with Fortis Bank.

London Metal Exchange copper fell as much as 0.8 percent to $3,265 a ton and traded at $3,275 at 10:34 a.m. Singapore time, down 4.5 percent this week. The metal is up 6.7 percent this year on speculation Chinese consumers are making purchases.

Copper for May delivery gained as much as 1.7 percent to 27,150 yuan ($3,972) a ton on the Shanghai Futures Exchange, and stood at 26,900 yuan.

Reports that China’s State Reserve Bureau was probably going to restock copper by some 300,000 tons is supporting prices, according to VM Group analysts led by Carl Firman.

“The market cannot depend on the SRB doing such large purchasing forever,” given the background of economic gloom, said Firman. “At some point, this state reserve may well come back into the market, capping any price move higher.”

Among other LME-traded metals, aluminum was little changed at $1,347 a ton, and zinc fell 1.2 percent to $1,119 a ton. Nickel added 0.5 percent to $9,950 a ton, while lead and tin had not traded as of 10:40 a.m. in Singapore.

To contact the reporter on this story: Glenys Sim in Singapore at Gsim4@bloomberg.net