Copper Rises on Global Stockpile Drop, U.S. Manufacturing Data

By Li Xiaowei

Feb. 3 (Bloomberg) -- Copper climbed in London after global stockpiles fell for the first time in seven weeks and as manufacturing in the U.S., the world’s second-largest user after China, shrank less than economists forecast.

London Metal Exchange-monitored inventory fell 325 metric tons to 491,200 tons yesterday, the first decline since Dec. 11. The U.S. Institute for Supply Management’s factory index rose to 35.6 in January from 32.9 in the prior month, as a decline in new orders moderated. Readings less than 50 signal a contraction.

“The unexpected inventory decline and the factory index rebound supported copper,” Chen Yonglin, an analyst with Citic Futures Co., said from Shanghai today.

Copper for three-month delivery rose 1.6 percent to $3,225 a ton on the London Metal Exchange at 12:43 p.m. in Shanghai.

April-delivery copper on the Shanghai Futures Exchange rose 3.2 percent to 25,970 yuan ($3,797) at the same time.

“As the premium of Shanghai prices over London has narrowed, we’d expect closure of arbitrage positions,” Citic’s Chen said.

The improvement in the U.S. ISM manufacturing index was only due to textiles and petroleum and coal, while others sectors including fabricated metals contracted, Anne-Laure Tremblay, an analyst at BNP Paribas, said in an e-mailed report today.

Construction Spending

Construction spending in the U.S. dropped 5.1 percent in 2008, the most since records began in 1993, according to a Commerce Department report yesterday. Non-residential construction slid 0.6 percent in December, showing a collapse in residential building may be spreading to commercial properties.

Builders are the biggest users of copper in the U.S.

Among other LME-traded metals, aluminum fell 0.5 percent to $1,382.50 a ton, zinc added 2.1 percent to $1,137 and lead rose 1.8 percent to $1,125.

Ningbo Sunhu Chemical Products Co., China’s biggest nickel trader, said its post-Lunar New Year sales slumped as 90 percent of its customers remained closed because of a lack of demand.

Sales in the first two days after the week-long holiday dropped 95 percent from the same period last year, Kevin Ji, chief analyst, said in a phone interview from Beijing today.

To contact the reporter for this story: Li Xiaowei in Shanghai at xli12@bloomberg.net