"Copper Advances on Speculation China Is Near End of Tightening"
By Agnieszka Troszkiewicz - Jul 4, 2011
Copper and zinc rose to a two-month high in London on speculation China, the world’s biggest user of the metal, is near the end of monetary tightening after figures showed service industries slowed.
Service industries expanded at the weakest pace in four months in June, the China Federation of Logistics and Purchasing said yesterday. Growth in Chinese manufacturing was the slowest since February 2009, a report showed last week. Copper also gained today as workers went on strike at Freeport-McMoRan Copper & Gold Inc.’s Grasberg mine in Indonesia.
“We are getting toward the end of the tightening,” said Nic Brown, head of commodities research at Natixis Commodity Markets Ltd. in London. “As base effects start to reduce over the coming six to nine months, we should see the end of the Chinese tightening.”
Copper for three-month delivery climbed $10, or 0.1 percent, to $9,455 a metric ton on the London Metal Exchange, the highest closing price since April 26. Investors bought and sold 9,230 copper futures, a fifth of the July 1 total. Floor trading on the Comex in New York was closed today for Independence Day.
“One source of support is the unexpectedly sound U.S. economic data announced on Friday,” Commerzbank AG analyst Eugen Weinberg in Frankfurt said in a report. U.S. manufacturing unexpectedly sped up in June, figures showed July 1, signaling the world’s largest economy and second-ranking copper user may be starting to rebound.
Rate Increases
China’s central bank raised reserve requirements 12 times and interest rates four times since the start of last year to tame inflation that climbed to 5.5 percent in May, the fastest pace in almost three years. Speculation that borrowing-cost increases may be near an end helped the Shanghai Composite Index of shares to close today at the highest level since May 20.
Workers at Grasberg started a seven-day strike demanding wage increases, company spokesman Ramdani Sirait in Jakarta said. About 8,000 non-staff workers are members of the union and not all of them are on strike, he said.
“This is a market in which any kind of problem on the supply side just tightens what is already a difficult situation,” Natixis’s Brown said. “It’s a constant reminder the copper market is in a situation of tight supply and will remain that way until the big mines that are arising late 2013 and onwards will finally turn up.”
Tin for three-month delivery on the LME was little changed at $25,650 a ton and aluminum increased 0.3 percent to $2,511 a ton. Zinc rose 1.4 percent to $2,398 a ton, the highest closing price since April 15. Nickel climbed 0.8 percent to $23,175 a ton and lead advanced 0.4 percent to $2,684 a ton.
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