Copper Gains as China's Industrial Production Rises
By Claudia Carpenter
Oct. 19 (Bloomberg) -- Copper rose for a second day in London on expectations that China's economic growth is fast enough to spur demand for the metal used in power plants, cars and homes.
China's industrial production rose 16.1 percent in September from a year earlier, the National Bureau of Statistics said today in Beijing. The gain in August was 15.7 percent. Gross domestic product in the third quarter rose 10.4 percent from a year earlier, the bureau also said. Second-quarter expansion was 11.3 percent. China is the biggest copper user.
``You can't lose sight of the fact growth is still running 10 percent plus,' said Alex Heath, head of base metals at RBC Capital Markets in London, in a phone interview. ``That, in the world of metals, points to copper and that means they'll continue to be a buyer.'
Copper for delivery in three months rose $20, or 0.3 percent, to $7,670 a metric ton at 11:38 a.m. on the London Metal Exchange. Prices rose 0.1 percent yesterday. The metal soared 96 percent in the past year and traded at a record $8,800 a ton on May 11.
Usage in China fell 7.8 percent in the seven months through July, the International Copper Study Group said this week. Consumers may have used inventory in the period, Heath said.
``China has been destocking for so long they need to come to the market and buy,' he said.
Contract Negotiations
Still, price gains may be limited as buyers in Europe hold off purchases during contract negotiations with suppliers, said Michael Widmer, an analyst in London at Calyon, one of 11 companies that trade on the LME floor. Consumers are trying to agree on so-called premiums, the surcharge paid on top on the LME benchmark price to take delivery of the metal.
``We've seen premiums in Europe easing over the past two months from $100 a ton to $90, and the last one I heard was $60 to $80 a ton,' Widmer said.
Chinese Premier Web Jiabao is trying to slow economic growth to avoid overheating. The central bank has raised interest rates twice. Retail sales in September rose 13.9 percent from a year earlier, the most since January, today's report said.
``The barrage of data today shows the economy continues to slow from the first half, and it suggests interest rate hikes had some effect,' Heath said.
China's industrial production growth compares with the 15.8 percent median forecast of 24 economists surveyed by Bloomberg. The nation is also the largest consumer of steel and other metals including aluminum and zinc.
Nickel for delivery in three months on the LME rose $300, or 1 percent, to $31,200 a ton. Inventory in warehouses approved by the LME fell 378 tons to 4,932 tons.
Nickel Mine Strike
Prices of the metal used to make stainless steel fell 1.6 percent yesterday on signs of a possible end to a four-week strike at New Caledonia, Heath said.
Eramet SA, the biggest producer of nickel in New Caledonia, said today workers returned to work at its largest nickel mine on the island north of New Zealand after police cleared strikers.
Three of the company's four mines in the French-controlled territory are now operating and Eramet is ``hopeful' of resuming normal shipments to customers next week, said Pierre Alla, chief executive officer of Eramet's Le Nickel-SLN unit.
Other metals on the LME rose. Aluminum gained $17, or 0.6 percent, to $2,732 a ton. Earlier it traded at $2,739, the highest since May 30. Zinc rose $67 to $3,948, lead increased $15 to $1,510 and tin was up $200 at $9,900.
To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.net
Last Updated: October 19, 2006 06:46 EDT
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