Copper Rises in London as Recovering Economies May Spur Demand

By Anna Stablum

July 21 (Bloomberg) -- Copper and aluminum rose in London on speculation recovering economies will spur demand for metals used in construction and automobiles. Lead and nickel fell.

The index of leading indicators in the U.S., the world’s second-largest copper consumer, increased in June for a third consecutive month, according to the U.S. Conference Board. Copper slumped 54 percent last year as recessions in Japan, Europe and the U.S. curbed consumption.

“The evidence of a turnaround is quite convincing,” Dan Smith, an analyst at Standard Chartered Plc in London, said by phone. “It is pretty clear that places like the U.S., Japan and Europe are bottoming out in terms of the cycle.”

Copper for three-month delivery gained $28, or 0.5 percent, to $5,378 a metric ton as of 11:15 a.m. on the London Metal Exchange. Yesterday the metal rose to $5,464.75, the highest intraday price since Oct. 14.

Copper futures for September delivery declined 0.7 percent to $2.452 a pound on the Comex division of the New York Mercantile Exchange.

Aluminum rose 0.8 percent to $1,724 a ton. The metal, used in transport, packaging and power lines, rose to $1,787 yesterday, the highest intraday price since Dec. 1.

“We have been quite bullish on aluminum for the last few months,” Smith said.

Backwardation Disappears

Copper has jumped 75 percent this year on demand from China, the world’s largest consumer of the metal. The LME copper market moved into so-called backwardation last week for the first time since May 1 as metal for nearby delivery traded at a premium to three-month copper, indicating scarce supplies. The spread moved into a discount yesterday of $11.25 a ton from this year’s high of a $21 premium on July 14.

There is one party holding 50 percent to 79 percent of LME copper inventories, LME data from July 17 showed.

Copper inventories rose to 266,425 tons today, the third consecutive gain. So-called canceled warrants, or metal earmarked for delivery from the total stockpile monitored by the LME, fell to 8,725 tons or 3.3 percent of total inventories, today’s daily LME report showed. This is down from 21 percent at the start of May.

Aluminum stockpiles booked for delivery out of warehouses monitored by the LME have risen 28 percent this month. During the same period, total inventories have risen 3.6 percent to a record of 4.6 million tons.

“The large volume of metal tied up in financing deals will put growing upward pressure” on prices for contracts closest to delivery, Gayle Berry, an analyst at Barclays Capital in London, said in a report yesterday.

Aluminum Contango

The contango, with metal for immediate delivery cheaper than supplies with the three-month delivery contract, has narrowed 29 percent since this year’s low on March 25.

Aluminum supplies will exceed demand by 1.1 million tons this year and 799,000 tons next year, Barclays forecast.

Among other LME metals, nickel fell 1.6 percent to $15,970 a ton. Lead dropped 0.9 percent to $1,699 a ton, zinc declined 1.4 percent to $1,642 a ton, and tin was 0.8 percent lower at $13,890 a ton.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net