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Copper up as depleting stocks lift demand outlook

Copper for three months delivery on the London Metal Exchange rose to $3,660 a tonne at 1059 GMT. The metal used in power and construction closed at $3,611 on Monday.

Stocks of copper in LME warehouses fell 6,675 tonnes to 512,025. Copper stocks have declined by 36,000 tonnes since the end of February, signalling a turnaround from steep increases in inventories that has pressured the metal since last May.

Stocks in nickel, tin, lead and zinc also fell.

‘It is a comforting theme for copper watchers. It was good to see almost across the board, some nice erosion,’ said Nick Moore, a commodity strategist at RBS Global Banking & Markets.

But he added that investors, looking for rays of light in a global economic crisis, should be wary that material heading into China was largely for accumulation at cheap prices, as opposed to an indication of genuine demand.

Moore said the story for copper begins and ends with China, the world’s largest consumer of the metal.

‘Demand is still absolutely woeful,’ he said. ‘This (rally) is more to do with the comfort that we may have seen the peak of the inventory build. But it’s early days.’

Moore said investors will also keep a keen eye on Chinese trade numbers for February, due on Wednesday. The copper component of the import data is expected to exceed December’s record 211,527 tonnes.

FORTUNES

Investors are pinning hopes on China’s stimulus package triggering an upswing in demand. China announced a $585 billion investment plan in November as exports crumbled in the face of the world economic crisis.

‘The fortune of the base metals depends on China and how quickly the Chinese stimulus package starts feeding through to the market,’ said Standard Bank analyst Leon Westgate.

He too said excitement about copper heading into China should be viewed along with the likelihood that it was merely for stockpiling by the State Reserves Bureau.

Cancelled warrants for copper-material earmarked to leave LME warehouses-fell to 46,175 tonnes from 54,100 tonnes.

Signalling weakness in fundamentals, Chilean copper miner Antofagasta posted a sharper-than-expected 39 percent fall in 2008 net profit due to a slide in metals prices.

Stocks of aluminium, which is used in transport and packaging, bucked the trend, rising 12,250 tonnes to nearly 3.3 million tonnes. Prices of the metal have been hammered by deteriorating auto sales and bleak prospects for the industry.

Aluminium was little changed at $1,301 from $1,300.

Other metals staged a mixed performance.

Nickel traded lower at $9,657 from $9,675. Lead drifted down to $1,247 from $1,250 and tin rose to $10,950 from $10,900. Zinc

climbed nearly 2 percent to $1,248 from $1,225. Metal Prices at 1059 GMT

MetalLastChange Percent MoveEnd 2008

Ytd Percent

move

COMEX Cu165.652.70+1.66139.5018.75

LME Alum1296.00-4.00-0.311535.00-15.57

LME Cu3655.0044.00+1.223060.0019.44

LME Lead1245.00-5.00-0.40999.0024.62

LME Nickel9550.00-125.00-1.2911700.00-18.38

LME Tin10825.00-495.00-4.3710700.001.17

LME Zinc1242.0017.00+1.391208.002.81

SHFE Alu11665.00110.00+0.9511540.001.08

SHFE Cu*29230.00210.00+0.7223840.0022.61

SHFE Zin10605.00140.00+1.3410120.004.79 ** 1^st contract month for COMEX copper * 3^rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07