Copper drops 2% on rising inventory

Copper fell in London after inventories gained the most in 10 weeks, spurring speculation that demand growth will weaken, easing a shortage that began in 2003.

Stockpiles tracked by the London Metal Exchange jumped 4.3 percent to 190,575 metric tons, the exchange said today in a daily report. That's the highest since March 2004.

Nick Moore, a London- based metals analyst at ABN Amro Holding NV, said last month that he expects a surplus of 100,000 tons of copper in 2007.

Copper for delivery in three months on the LME dropped $144, or 2.3 percent, to $6,186 a ton as of 12:33 p.m. Earlier, the metal used in wires and pipes fell to $6,183, the lowest since April 20.

"Entering 2007, the copper market is much less tight with slowing demand and rising supply being reflected in the ongoing increase in stocks,'' UBS analysts John Reade and Robin Bhar said today in a daily report.

The metal gained 44 percent in 2006, a fifth consecutive annual increase, after years of underinvestment and supply disruptions at Chile's Escondida and Indonesia's Grasberg, the world's two largest copper mines.

The rally attracted pension and hedge funds. Investment from money managers in funds tracking commodity indexes doubled to $110 billion in 2006, American International Group forecast in November.

Most of the increases in LME stockpiles took place in the US, the second-biggest copper-using nation.