Copper fell for a fifth day on the London Metal Exchange, the worst losing streak since December, on a rebound by the dollar and on speculation that fading demand will send Chinese stockpiles higher.
The US Dollar Index, a gauge of the greenback’s value against six other currencies, rose for the first time in three days, making dollar-priced metals more expensive for holders of other monies. Imports of copper into China, the world’s largest consumer, are likely to slow after this month, said Max Layton, an analyst at Macquarie Bank Group Ltd. in London.
“We are expecting some big tonnage increases in Shanghai inventories over the next two months, with Shanghai copper driving LME prices down,” he said today by phone. Demand will enter a seasonal weak period next month, Layton said.
Copper for three-month delivery fell $20, or 0.4 per cent, to $4,940 a tonne on the LME, rebounding from a drop of as much as 0.8 per cent. Yesterday the contract slid as low as $4,880, the lowest intraday price since June 4. The metal for July delivery lost 0.7 per cent to $2.243 a pound on the New York Mercantile Exchange’s Comex division.
Inventories of copper in Shanghai warehouses rose to the highest since March 2008 last week, according to weekly figures. Chinese stockpiling has helped it jump 60 per cent this year on the LME.
“We expect the price will fall 10 to 15 per cent over the next two months,” Layton said. Still, it’s “difficult to short copper when LME stocks are still falling and refined Chinese imports for May were extremely high,” he added.
A short position is a bet on lower prices. Copper stockpiles in warehouses monitored by the LME slid for a 30th straight session today to 281,600 tonnes and have declined 49 per cent from a high this year.
on February 25. Cancelled warrants, indicating metal to be taken from storage, have fallen to 6.1 percent of total LME inventories from 21 percent on May 1.
China’s imports of copper and products made from the metal increased 6 percent in May from April to 422,666 tons. The country’s government is spending 4 trillion yuan ($585 billion) to stimulate economic growth.
The Chinese economy will expand in 2009 by 7.2 per cent from a year earlier, the World Bank said today in a report released in Beijing. That was higher than its 6.5 per cent forecast in March.
Among other LME metals for three-month delivery, aluminum rose $12, or 0.7 per cent, to $1,634 a tonne. Stocks monitored by LME-warehouses have risen 88 per cent this year to a record 4.4 million tonnes as the world recession caused demand to slump.
About three-quarters of LME inventories of the lightweight metal are locked into financial accords that put the supplies beyond users’ reach, according to Alcoa Inc.’s Greg Wittbecker. The company is the biggest U.S. producer of the metal, mainly used in the automotive, packaging and construction industries.
The metal is tied up in so-called cash-and-carry trades, which let speculators sell forward futures when buying the commodity on the spot market, Wittbecker, Alcoa’s director of materials management, said at a meeting in Chicago on June 16.
Aluminum is up 6.1 percent this year on the LME after dropping 36 per cent in 2008 and 14 percent in 2007.
“Together with recent broad-based fund inflow into commodities, the tying-up of aluminum inventories has provided support to the price, as well as a potential for a technical short squeeze,” Macquarie’s Layton said.
Lead rose 0.5 per cent to $1,670 a tonne, and zinc gained 1.3 per cent to $1,571.75 a tonne. Tin fell 0.7 percent to $15,000 a ton, and nickel slipped 0.1 per cent to $14,830 a tonne.
