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Copper Leads Advance in Industrial Metals on Recovery Optimism

By Glenys Sim

July 31 (Bloomberg) -- Copper jumped to the highest in almost 10 months and aluminum headed for its best month in more than 21 years on optimism a global economic recovery will revive demand for industrial metals.

Copper has surged 84 percent this year as record Chinese imports and stimulus spending by governments including the U.S. and China spurred raw-material purchases. China’s central bank yesterday reiterated it will maintain a “moderately loose monetary policy,” easing concern that surging loans and asset prices may trigger fiscal tightening.

“Investors are feeling very positive about China’s commitment to maintaining economic growth,” Zhu Bin, president of futures research at Nanhua Futures Co., said from Hangzhou.

Copper for three-month delivery on the London Metal Exchange climbed 2.1 percent to $5,719 a metric ton, the highest since Oct. 7, at 12:56 p.m. in Singapore. The metal is up 15 percent this month.

November-delivery copper in Shanghai jumped as much as 4.6 percent to 45,120 yuan ($6,604) a metric ton, just 190 yuan short of the day’s trading limit set by the exchange.

Three-month delivery aluminum gained 0.5 percent to $1,889 a ton, the highest since Nov. 19. The metal used in automobiles and airplanes has advanced 16 percent this month.

Positive recent global economic data stoked optimism that demand for metals, driven in the first half by China’s stimulus spending, will be sustained as the deepest recession in more than six decades bottoms out.

Stimulus Effect

In the U.S., the world’s second-biggest metals consumer, housing starts rose in June to the highest level since November, while July’s jobless claims held below June levels. In Europe, confidence in the economic outlook increased more than economists forecast in July, while Japanese factory output capped the fastest quarterly output expansion in more than half a century.

In China, record bank lending boosted demand for properties, sending home prices in 70 cities higher for the first time in seven months in June, and passenger vehicle sales rose 48 percent in the same month, the most since February 2006.

“The Chinese government’s 4 trillion yuan stimulus has supported sentiment in the first half of the year, and the effects of this stimulus will support the market in the second half of the year,” Ma Xiaoxin, deputy general manager of Beijing-based China Minmetals Nonferrous Metals Co.’s copper department, said in a July 28 interview.

China’s copper imports expanded for a fifth month in June, driven by purchases from the country’s State Reserve Bureau and other consumers.

Mining Stocks

“Stockpiling by the State Reserve Bureau led to record levels of refined copper imports in the first half of the year, and economic recovery will keep imports of refined copper at similarly high levels for the rest of the year,” said Ma.

“An expected fall in copper concentrate imports will be offset by an increase in scrap imports, so overall copper imports into China will be steady,” Ma added.

The surge in metals prices has triggered gains in related equities. The MSCI World/Materials Index, a measure of mining and chemical companies, is up 33 percent this year as the LME Index of 6 nonferrous metals climbed 56 percent.

BHP Billiton Ltd., the world’s biggest mining company, gained as much as 2.4 percent on the Australian stock exchange today, its steepest intra-day rise in nine trading days. The stock was 1.6 percent higher at A$37.74 at 2:56 p.m. in Sydney.

Rio Tinto Group, the third-largest miner, surged as much as 3.5 percent to a six-week high and last traded 3.1 percent higher at A$59.87.

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