Shanghai Copper Gains for Second Day on China, Economic Outlook

By Jae Hur

Feb. 26 (Bloomberg) -- Copper futures advanced for a second day in Shanghai on optimism that China’s metal purchases and spending by governments to revive economies will boost demand for industrial metals.

China’s State Reserve Bureau bought 100,000 metric tons of zinc yesterday, said four people familiar with the transaction. President Barack Obama this week vowed to use “the full force of the federal government” to shore up the U.S. banking system. Federal Reserve Chairman Ben S. Bernanke said the recession may end this year should the government restore financial stability.

“Industrial metals are very sensitive to the global economy,” said Hiroaki Hama, an analyst at Mizuho Corporate Bank Ltd. in Tokyo. Recent purchases of metals by China, the world’s top consumer, have lent support to the market, he said.

May-delivery copper on the Shanghai Futures Exchange rose 2.6 percent from the previous close to 28,220 yuan ($4,123) a metric ton at 11:10 a.m. local time after touching 28,420 yuan, the highest since Feb. 13.

Copper for three-month delivery on the London Metal Exchange gained as much as 1.4 percent to $3,458 a ton before trading at $3,430 a ton. LME-tracked inventories of copper rose to 548,400 tons yesterday, the highest since October 2003.

The amount of the metal scheduled to be taken out of LME-monitored warehouses, known as canceled warrants, jumped yesterday to 30,375 tons, or 5.5 percent of inventories, from 3.3 percent the previous day. This suggests “some pickup in physical interest,” William Adams, an analyst at BaseMetals.com in London, said yesterday.

Economic Barometer

Copper is widely used in homes, cars and appliances, making its price a barometer of economic activity. The U.S., Japan and Europe were all saddled with recessions last year, the first simultaneous contractions since 1945.

Japan’s copper wire and cable shipments plunged 21 percent to 53,100 tons in January from a year earlier, the biggest monthly drop in more than three decades, the Japanese Electric Wire and Cable Makers’ Association said on Feb. 24.

The country’s output of copper and copper alloy fabricated products, including sheets and tubes, plunged 45 percent in January from a year earlier to 43,390 tons, the lowest level since August 1975, the Japan Copper and Brass Association said on Feb. 24. The monthly drop was the most since December 1974.

Aluminum for delivery in three months rose 0.5 percent to $1,350 a ton and London zinc was down 0.4 percent at $1,140. Shanghai aluminum for May delivery climbed 0.6 percent from the previous close to 11,825 yuan and zinc added 1 percent to 10,390 yuan by 11:10 a.m. Shanghai time.

Among other LME-traded metals, lead added 1 percent to $1,040 a ton and nickel gained 0.3 percent to $10,100 a ton.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net