Farallon Resources Ltd. (fka FRLIF)

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Zinc up 1%, Copper May Decline in New York on Concern U.S. Economic Rebound Is Cooling

By Anna Stablum - Aug 4, 2010 5:11 AM PDT Wed Aug 04 12:11:19 UTC

Copper may fall for a second day in New York and London on concern that a report will show a further cooling of the economy in the U.S., the world’s second-biggest user of the metal after China.

The Institute for Supply Management’s index of non- manufacturing businesses, which covers about 90 percent of the economy, slid in July, according to economists. U.S. consumer spending, pending home sales and factory orders were all weaker than projected in June, figures showed yesterday. A report due Aug. 6 may show that U.S. nonfarm payrolls declined.

“Recent data out of the U.S. continues to imply an economy that is losing momentum amid tepid job gains,” said Alex Heath, head of industrial-metals trading at RBC Capital Markets in London. “As a result, the pre-payrolls data today will carry greater-than-usual importance.”

Futures for September delivery rose 0.15 cent to $3.36 a pound at 7:59 a.m. on the Comex in New York, erasing a decline of as much as 0.8 percent. Copper for delivery in three months slipped 0.1 percent to $7,418 a metric ton on the London Metal Exchange.

The ISM index declined to 53 from 53.8 in June, according to the median forecast of 76 economists surveyed by Bloomberg News. Readings above 50 signal expansion. The figures are due at 10 a.m. Washington time. The monthly report on U.S. employment may show that non-farm payrolls shrank by 60,000 in July, according to a separate survey.

‘Healthy’ Indicators

“Concerns over the likely trajectory of the global macro economy” have influenced prices in recent sessions, Michael Widmer, an analyst at Bank of America Merrill Lynch, said in a report dated yesterday. Still, other indicators have stayed “quite healthy,” he said, citing a drop in stockpiles that “suggests continued fundamental support.”

Copper will outperform gold in coming years because of Chinese demand and the nascent electric car industry, according to Vancouver-based Ivanhoe Mines Ltd., which is developing the Oyu Tolgoi project in Mongolia with Rio Tinto Group. Rio has described the mine as the world’s largest untapped copper and gold resource.

“We need more copper in the next 20 years than was mined in the last 110 years,” Ivanhoe Chairman Robert Friedland said today at the Diggers and Dealers conference in Kalgoorlie, Western Australia. “Those of us in the business don’t have any idea where this metal is going to come from.”

Gold for immediate delivery has risen 9 percent this year, while LME copper is up 0.6 percent.

Inventories Contract

Copper stockpiles tracked by the LME shrank for a second day this week, slipping 125 tons to 413,950 tons, daily exchange figures showed. They slid 8.3 percent in July, the most since June 2009, and are down 18 percent this year, on course for the first annual drop since 2004.

Canceled warrants, or bookings to draw metal from stockpiles, fell 3.9 percent to 29,925 tons.

Aluminum for three-month delivery on the LME added 0.5 percent to $2,215 a ton. The contango, cash metal’s discount to the three-month contract, narrowed to $9.25 a ton today, the lowest since 2007, from $10.25 in the prior session, according to LME data.

Tin gained 0.3 percent to $19,900 a ton after reaching $20,000, the highest intraday price since Sept. 1, 2008. Lead fell 0.5 percent to $2,209.25 a ton, zinc rose 1 percent to $2,106 a ton and nickel was little changed at $21,652 a ton.

http://www.bloomberg.com/news/2010-08-04/copper-may-decline-in-london-on-concern-u-s-economic-rebound-is-cooling.html