Farallon Resources Ltd. (fka FRLIF)

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Zinc little change, Copper Gains in New York Before Report on U.S. Leading Economic Indicators

By Anna Stablum - Aug 19, 2010 4:44 AM PT

Copper rose in New York and London to the highest price in more than a week before a report that may show a stronger gauge of the economic outlook for the U.S., the world’s second-biggest consumer of the metal.

The index of leading indicators probably climbed in July for the second time in four months, said economists surveyed by Bloomberg News. Separate figures may show that manufacturing sped up in the Philadelphia region and fewer Americans applied for jobless benefits.

“I expect a modestly growing U.S. economy,” said Peter Fertig, owner of Hainburg, Germany-based Quantitative Commodity Research Ltd. “That will be a supporting factor for base metals.”

Futures for December delivery gained 2.85 cents, or 0.8 percent, to $3.399 a pound at 7:28 a.m. on the Comex in New York. The most-active contract reached $3.41, the highest intraday price since Aug. 9. Copper for delivery in three months rose 1.1 percent to $7,470 a metric ton on the London Metal Exchange.

The Conference Board’s gauge of the outlook for the next three to six months, due at 10 a.m. in Washington, rose 0.1 percent after falling 0.2 percent in June, the median forecast of 58 economists in a Bloomberg News survey shows. The Federal Reserve Bank of Philadelphia’s general economic index, due at the same time, rose to 7.2 this month, the survey showed.

Building Inventories

Labor Department figures to be released at 8:30 a.m. in Washington may show initial jobless claims fell to 478,000 last week from 484,000 in the prior week, according to the survey median. Growth in the U.S. would promote restocking of metals, according to Fertig.

“Inventory buildup will still continue, and that is one of the supporting factors,” he said.

Copper inventories tracked by the LME rose to 403,525 tons after falling for four days to the lowest level since Nov. 12 as of yesterday, according to daily exchange figures. They are down 2.4 percent this month after sliding 8.3 percent in July. Stocks have fallen 20 percent this year, on course for the first annual drop since 2004.

Orders to draw metal from inventories, or canceled warrants, rose for a fourth day, gaining 4.7 percent to 32,400 tons. They have surged 58 percent this week, heading for the biggest jump in five months.

Aluminum Stockpiles

Aluminum for three-month delivery on the LME rose 0.4 percent to $2,114 a ton. Inventories of the lightweight metal tracked by the LME slipped 0.1 percent to 4.46 million tons. They have dropped 3.8 percent from a record high in January. An estimated 60 percent to 65 percent of LME stockpiles are tied into financing accords, according to Deutsche Bank AG.

“A lot of aluminum stocks at LME warehouses are earmarked as collateral for loans, and then they cannot be sold that easily,” said Fertig of Quantitative Commodity Research. “So the situation is tighter than the figures for warehouse inventories would suggest.”

Investors yesterday paid the most in 22 months to borrow aluminum for a day as the so-called tom-next spread widened to as much as $9 a ton. Today it traded as high as $6. Yesterday was the so-called prompt date, the day each month on which investors who opted to take delivery receive metal.

Stockpiles have risen 1.9 percent this week. Aluminum has dropped 5.3 percent on the LME in 2010 after last year’s 45 percent advance.

Under $2,000?

“Should stock-building continue, aluminum should come under more pressure,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said in a report today. “We expect prices below $2,000 a ton in the near term.”

The contango, cash aluminum’s discount to the three-month contract, widened to $6 a ton today from the prior session’s $1.75, the narrowest level since March 2007, according to LME data. Cash metal is at a premium to September-delivery aluminum, a so-called backwardation that increased to $17 at yesterday’s close from $10 the day before.

Tin climbed 1.9 percent to $21,400 a ton. LME inventories rose 0.1 percent to 14,065 tons and are up 1.4 percent this week. Cash tin’s premium to the three-month contract narrowed to $70 a ton yesterday from the prior day’s $140, according to LME data. It reached $200 a ton on Aug. 13, the widest level since Oct. 27.

Nickel gained 1.6 percent to $22,250 a ton, lead advanced 0.8 percent to $2,139 a ton and zinc was little changed at $2,136 a ton.

http://www.bloomberg.com/news/2010-08-19/copper-gains-in-london-before-report-on-u-s-leading-economic-indicators.html