Farallon Resources Ltd. (fka FRLIF)

[the cork]

Zinc advances, Copper May Rise in New York on Longest Streak of Stock Declines in a Year
By Anna Stablum - Jul 20, 2010

Copper may rise for a second day in New York on the longest streak of inventory declines in more than a year and on gains by Chinese equities that fueled optimism about the demand outlook.

Stockpiles of copper tracked by the London Metal Exchange shrank for a 23rd day today. Chinese shares rallied for a second day on prospects that the state may relax tightening measures as the economy slows. Concern about efforts to curb growth in China, the world’s biggest copper user, contributed to LME metal’s 16 percent drop in the second quarter.

“Stronger Chinese equities suggest that the prospects for the Chinese economy are improving,” David Thurtell, a Citigroup Inc. analyst in London, said by telephone. “Copper stocks keep falling.”

Futures for September delivery gained 0.85 cent, or 0.3 percent, to $2.9465 a pound at 8:05 a.m. on the Comex in New York, paring a gain of as much as 1.5 percent. Copper for delivery in three months added 0.5 percent to $6,542 a metric ton on the LME.

LME-monitored copper inventories fell to 419,600 tons, the lowest level since Nov. 18. The current streak of drops is the longest since a 40-session run that ended on July 2, 2009, data compiled by Bloomberg shows. Stockpiles are down 16 percent this year and on course for the first annual drop since 2004.

Discount Narrows

Bookings to remove copper from LME warehouses jumped 5.7 percent to 33,050 tons. Immediate-delivery metal’s discount to the three-month price, the so-called contango, narrowed to $15.25 yesterday from $16.25 in the previous session and $21 a week ago.

Prices pared gains as the dollar rebounded. The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, advanced as much as 0.6 percent, wiping out a drop. A stronger dollar makes metals priced in the currency more expensive in terms of other monies.

Chinese economic growth slowed to 10.3 percent in the second quarter and the consumer price index dropped 0.6 percent in June from May, signaling a diminishing risk of overheating, figures showed last week. Industrial output in the country rose 13.7 percent last month, less than all but one of 27 forecasts in a Bloomberg News survey.

“Certainly last week’s GDP data showed a moderation in growth, but more importantly, the CPI fell, which gives Beijing more scope to take its foot off the brake,” Citigroup’s Thurtell said. “That is good for metals demand.”

More Usage, Limited Supply

Increased copper consumption and limited supplies of refined and scrap metal will support prices, Laredo, Texas-based researcher Harbor Intelligence said in a monthly report e-mailed yesterday. Usage will outpace supply by 125,000 tons this year, with the deficit widening to 180,000 tons next year, according to the report.

“Prices have exited the correction/bear-market phase, and we should expect higher prices for the rest of the year and early 2011,” Harbor Intelligence said. Comex copper will average $3.28 a pound ($7,231 a ton) this year before rising to $3.70 next year, the researcher predicted.

Still, a report due at 8:30 a.m. Washington time probably will show that housing starts in the U.S., the second-largest copper consumer, fell in June to the lowest level of the year, economists said. Work began on 577,000 houses, down 2.7 percent from May and the fewest since December, according to the median estimate in a Bloomberg News survey.

Construction accounts for a quarter of copper demand, according to the Copper Development Association.

Aluminum, Tin

Aluminum for three-month delivery on the LME fell 1 percent to $1,953 a ton after stockpiles increased the most in four months. Inventories in LME warehouses rose 1.1 percent, the biggest climb since March 18, to 4.42 million tons.

Cash metal’s discount to the three-month contract, widened to $21.50 yesterday. It shrank on July 15 to $16.25, the narrowest closing level since April 2007.

Lead gained 0.6 percent to $1,785 a ton and nickel advanced 0.2 percent to $18,840 a ton. Zinc climbed 1.7 percent to $1,838 a ton and tin fell 0.3 percent to $17,900 a ton.

http://www.bloomberg.com/news/2010-07-20/copper-may-rise-in-new-york-on-longest-streak-of-stock-declines-in-a-year.html