Copper Drops for First Day in Three in Shanghai on Inventories

By Glenys Sim

Nov. 10 (Bloomberg) -- Copper fell for the first time in three days in Shanghai as global inventories extended their advance, easing concerns supply may not keep pace with demand.

Inventories tallied by the London Metal Exchange expanded for a fifth day to a six-month high of 389,475 metric tons yesterday, while stockpiles monitored by Comex stood at 65,590 short tons yesterday, the highest since August 2004. Stockpiles in Shanghai warehouses expanded 1,440 tons last week to 104,275 tons, the highest level since April 2004.

“To date, the increase in exchange copper stocks has not proved to be as much of a drag on the copper price as we had anticipated, but does represent an ongoing source of downside risk,” David Moore, commodity strategist at Commonwealth Bank of Australia, said in an e-mail today.

February-delivery copper on the Shanghai Futures Exchange dropped as much as 1.5 percent to 50,780 yuan ($7,437) a ton and ended the day at 50,860 yuan

Copper for delivery in three months on the London Metal Exchange lost as much as 0.3 percent to $6,520 a ton, before trading at $6,534.75 at 3:12 p.m. Singapore time. The December- delivery contract on the Comex division of the New York Mercantile Exchange was little changed at $2.9620 a pound.

The dollar’s rebound before the Veterans Day holiday in the U.S. tomorrow weighed on commodities from copper to crude oil and gold. The dollar rose today against a basket of six main trading partners, after falling to a 15-month low yesterday.

‘Not Unexpected’

Still, the increase in exchange copper stockpiles “is not unexpected,” said Moore. “There is some seasonality to copper market balances and, therefore, copper surpluses. The market tends to be less tight in the second half,” he added.

A labor dispute at BHP Billiton Ltd.’s Spence copper mine in Chile helped limit the metal’s losses. Workers walked out Oct. 13 after rejecting a wage offer and plan to stage a protest outside the company’s office in Santiago tomorrow, a union official said yesterday.

Among other LME-traded metals, aluminum fell 0.4 percent to $1,945 a ton, lead lost 1.7 percent to $2,260 a ton, and nickel slid 0.6 percent to $17,320 a ton. Zinc declined 0.5 percent to $2,150.25 a ton, while tin dropped 0.3 percent to $14,710 a ton as of 3:12 p.m. in Singapore.

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