Copper Climbs as Inventory Decline Signals Stable China Demand

 Feb. 8 (Bloomberg) -- Copper prices rebounded, halting a three-day slump, on signs that demand is stable in China, the world’s largest buyer of the metal.

Inventories of copper in Asian warehouses monitored by the London Metal Exchange dropped for a 12th consecutive session today, the longest decline since May. Prices slid 16 percent in the four weeks through Feb. 5 on speculation that the global economic recovery will slow, curbing raw-materials demand.

“There’s been some pullback recently, but we’re focused on the long-term picture of strong physical demand from places like China, and we think we’ll still see strength in copper prices,” said Brian Hicks, who helps manage about $1.5 billion at U.S. Global Investors in San Antonio.

Copper futures for March delivery increased 5.55 cents, or 1.9 percent, to $2.913 a pound on the New York Mercantile Exchange’s Comex division. That’s the biggest gain for a most- active contract since Jan. 19.

The metal also rose as traders who follow historical price patterns bought futures and the dollar slumped, Edward Meir, an MF Global analyst in Darien, Connecticut, said today in a report. He said the metal appeared to be “quite oversold” as the price fell to the lowest level in more than three months on Feb. 5.

The greenback sank as much as 0.4 percent against a basket of six major currencies, after touching the highest level since July 9 last week.

‘Risk Aversion’

“We’ve been seeing some risk aversion and money moving to the sidelines recently,” Hicks said by telephone on Feb. 5. “It’s going to be volatile in the short term. Longer term, stronger growth in China is going to be quite constructive as they develop their infrastructure.”

The metal more than doubled in 2009 as supplies shipped to the Asian country climbed to a record in the first half.

On the LME, copper for delivery in three months rose $170, or 2.7 percent, to $6,450 a metric ton ($2.93 a pound).

Prices for copper in Shanghai are about 5 percent higher than LME contracts, after taxes, according to Macquarie Group Ltd. analysts. The gap may spur an increase in China imports, the analysts said.

“Chinese demand is still strong,” said Colin Hamilton, a Macquarie analyst in London. “It’s cheaper to buy” LME contracts, he said.

Aluminum, nickel, lead and zinc also rose on the LME. Tin prices fell.

To contact the reporter on this story: Claudia Carpenter in London at ccarpenter2@bloomberg.netMillie Munshi in New York at mmunshi@bloomberg.net.