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Copper Prices Climb as Falling Inventories Signal Rising Demand

December 3, 2009 | Leave a Comment

April 15 (Bloomberg) — Copper rose the most in more than a week as declines in inventories signaled demand is rising for the metal used in pipes and wires.

Stockpiles monitored by the London Metal Exchange tumbled 2.4 percent to 480,400 metric tons. That’s the biggest one-day drop since Oct. 21. Copper prices have surged 57 percent this year on speculation that government spending will revive global growth and spur consumption of raw materials.

“The market has strengthened on the back of the decline in LME copper inventories,” Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said today in a report.

Copper futures for July delivery climbed 8.05 cents, or 3.8 percent, to $2.209 a pound on the New York Mercantile Exchange’s Comex division.

The price of copper will continue to climb as demand increases in emerging economies including China, the world’s biggest metals user, said Michael Cuggino, the chief executive officer of Pacific Heights Asset Management LLC.

“What’s happening in copper now is a reflection of the broader global economic story,” said Cuggino, who also helps oversee $3.4 billion as a portfolio manager. “We’re still expecting to see long-term global growth that’s going to drive demand for copper and the other commodities,” he said yesterday in an interview in New York.

Cuggino recommends investors buy shares of Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, as a way to take advantage of higher metals prices. Phoenix-based Freeport rose 81 percent this year before today.

Favoring Freeport

“We like Freeport now,” Cuggino said. “The things that will drive copper, the growth in China and the emerging markets, those things are the same reason to buy Freeport.”

Freeport gained 25 cents to $44.51 at 2:01 p.m. in New York Stock Exchange composite trading.

Still, stagnant U.S. economic growth may limit copper’s gains, said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York.

Industrial production in the world’s largest economy fell 1.5 percent in March, the 14th drop in the past 15 months, as factories trimmed unwanted stockpiles, the Federal Reserve reported today.

“Copper may be able to get as high as $2.25, but after that it is going to meet resistance,” Groenewegen said. “Levels that high do not seem sustainable given the weakness that is still present in the economy.”

Yesterday, copper touched $2.2415 a pound, the highest for a most-active contract since Oct. 20.

On the LME, copper for delivery in three months climbed $120, or 2.6 percent, to $4,819 a ton ($2.19 a pound). The price reached a record $8,940 on July 2.


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