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Industrial metals climb, Copper Rises Most in a Month on Bets Metal Demand Will Climb

By Millie Munshi and Anna Stablum

Dec. 16 (Bloomberg) -- Copper prices rose the most in a month on speculation that record-low U.S. interest rates will support demand for the metal used in pipes and wires.

The Federal Reserve today reiterated its intent to keep interest rates “exceptionally low” for “an extended period” and said the economy is strengthening. Copper prices have more than doubled this year as low borrowing costs and rising government spending spurred an economic rebound.

“Another year of low rates is good for all growth- sensitive assets, such as commodities,” Jesper Dannesboe, a Societe Generale commodity strategist in London, said before the Fed statement.

Copper futures for March delivery rose 4.75 cents, or 1.5 percent, to $3.189 a pound at 3:29 p.m. in after-hours trading on the New York Mercantile Exchange’s Comex division. The most-active contract earlier settled up 2 percent at $3.2055, for the biggest gain since Nov. 16.

Fed officials kept their benchmark target rate for overnight-lending between banks near zero percent, according to the statement released after the close of Comex floor trading. The central bank dropped the target-rate range to no more than 0.25 percent a year earlier.

Copper also climbed today as a report showed builders began work on more U.S. homes in November, while residential building permits rose to the highest number this year, indicating the recovery in property development may extend into 2010.

Housing Rebound

Housing starts rose 8.9 percent from October to an annual rate of 574,000 units, the Commerce Department said. Building permits, a sign of future home construction, climbed 6 percent to 584,000 units.

Builders account for a quarter of all copper consumption, according to the Copper Development Association.

“The housing-starts number showed a bit of a rebound for construction, and that’s positive for copper demand,” said Matt Zeman, a LaSalle Futures Group trader in Chicago.

Demand will be strong next year as consumption gains in China, the world’s biggest metal user, said Andrew Karsh, a co- manager of funds for the Credit Suisse Total Commodity Return Strategy team, which oversees about $4.4 billion.

“Industrial metals are a favorite of ours,” Karsh said yesterday in a telephone interview from New York. “There is real demand growing from emerging markets. Copper, lead, aluminum and other metals are required to increase infrastructure in places like China and India.”

On the London Metal Exchange, copper for delivery in three months gained $144, or 2.1 percent, to $7,039 a metric ton ($3.19 a pound), settling before the Fed issued its statement. Zinc, aluminum, nickel, tin and lead also rose in London.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aNg3bhaihpdQ