Copper Pares Losses in Shanghai on China Outlook, Supply Curbs

By Glenys Sim

Oct. 21 (Bloomberg) -- Copper pared losses in Shanghai as optimism about China’s economic growth and concerns that supplies may be disrupted cut back a decline that followed weaker-than-estimated U.S. housing data and rising inventories.

China’s National Bureau of Statistics will probably report tomorrow that growth in the largest metals user accelerated to 8.9 percent, driven by the government’s $586 billion stimulus package, according to a Bloomberg News survey of economists.

“Chinese economic growth continues to be robust on the back of strong domestic-focused consumption and infrastructure- based stimulus spending,” BHP Billiton Ltd., the world’s biggest mining company, said today in a quarterly output report.

January-delivery copper on the Shanghai Futures Exchange ended the day down 0.4 percent at 50,030 yuan ($7,328) a metric ton, trimming a decline of as much as 0.9 percent.

Copper for delivery in three months on the London Metal Exchange rose as much as 0.8 percent to $6,470 a ton, and traded at $6,460 at 3:26 p.m. Singapore time. The December-delivery contract advanced 0.4 percent to $2.9440 a pound on the Comex division of the New York Mercantile Exchange.

“Prices managed to rise even during the slow summer seasonal period,” said Lu Wei, an analyst at Jiangsu Holly Futures Brokerage Co. “The bulls seem to be winning all year, and this momentum and the weaker U.S. dollar will keep prices supported.”

Copper has more than doubled this year as the Dollar Index, which tracks the greenback against six major trading partners including the euro and yen, dropped 7.3 percent. The dollar traded little changed against the euro today, after falling to the weakest level in 14 months.

Supply Disruptions

BHP yesterday declared force majeure on some copper-supply contracts after the closure of a shaft at its Olympic Dam mine in Australia, while copper production at its Spence mine in northern Chile continues at a “reduced rate” due to a strike.

Builders, the biggest users of copper in the U.S., began work on new homes at an annual rate of 590,000 units last month, compared with a median target of 610,000 in a Bloomberg News survey. The worst post-war recession has curbed demand for the metal used mainly in construction and automobiles, boosting London Metal Exchange stockpiles by 68 percent in the past year.

“There are signs of stabilization in developed economies, though there’s little evidence yet of sustainable metals demand emerging,” BHP said in the production report.

Among other LME-traded metals, aluminum rose 0.7 percent to $1,927 a ton, zinc gained 0.4 percent to $2,139.25 a ton, and lead advanced 1 percent to $2,321 a ton. Nickel added 0.8 percent to $19,000 a ton, and tin rose 1 percent to $14,549 a ton.

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