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Copper Falls, Lead unchanged as Rising Stockpiles Signal Weakening Demand

By Chanyaporn Chanjaroen and Millie Munshi

Dec. 22 (Bloomberg) -- Copper prices fell as stockpiles climbed to the highest level in almost six years, signaling weaker demand for the metal.

Inventories tallied by the London Metal Exchange rose 0.3 percent today to 480,900 metric tons. Global supplies, monitored by the LME and exchanges in Shanghai and New York, have surged 74 percent this year to the most since February 2004, according to data compiled by Bloomberg.

“The market is focused on warehouse stocks that are continuing to rise,” said Adam Klopfenstein, a senior market strategist at MF Global Ltd.’s Lind-Waldock unit in Chicago. “It’s bringing into question what demand will look like.”

Copper futures for March delivery slipped 2.05 cents, or 0.6 percent, to $3.138 a pound on the New York Mercantile Exchange’s Comex unit.

“Metal inventories continue trending upward,” said Dan Smith, an analyst at London-based Standard Chartered Plc. Higher supplies of the metal and a strengthening dollar may result in “a pullback through the next couple weeks,” he said.

The dollar gained as much as 0.5 percent against a basket of six currencies today and is up 4.5 percent this month, paring a loss for the year to 3.8 percent. Some traders buy commodities as the greenback weakens to preserve purchasing power.

China Data

“The inflationary views seem to have been damped and that’s being reflected in the copper price,” said Lind- Waldock’s Klopfenstein. Traders “shrugged off” signs of rising demand in China, the world’s biggest metals user, he said.

Refined-copper imports by China rose to 194,388 tons at the end of last month, government data show. That’s up 15 percent from Oct. 30, which was the lowest level since November 2008.

Copper prices have more than doubled this year in New York as shipments into China climbed to a record in the first half.

“The Chinese news would ordinarily be bullish, but people are worried about the increasing supplies,” Klopfenstein said.

Production of copper outpaced consumption by 3,000 tons in September, the International Copper Study Group said yesterday in an e-mailed report.

In the first half of next year, metal prices will “be more indicative of the strength and sustainability of recovery,” analysts at Fitch Inc. led by Monica Bonar in New York said today in a report. The outlook for industrial metals is “stable,” the analysts said.

In London, copper for three-month delivery fell $54, or 0.8 percent, to $6,881 a metric ton ($3.12 a pound) on the LME. Among other metals traded on the LME, aluminum, nickel, tin and zinc fell. Lead was unchanged.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.oRVlq1a_ZU