Copper Trades Within 0.2% of Record on Demand, Supply Outlook

Dec. 15 （Bloomberg） -- Copper rebounded in London, trading within 0.2 percent of a record, on expectation that supply will lag behind demand as the global economy extends a recovery. Futures pared losses in Shanghai and New York.

Three-month-delivery copper on the London Metal Exchange rose as much as 0.9 percent to $9,245.25 a metric ton, and traded at $9,188 at 12:03 p.m. Singapore time. Copper reached a record $9,267.50 a ton yesterday, before reversing gains on concern that China will step up measures to curb inflation. Aluminum, zinc and nickel also climbed.

“At these high levels, we’re bound to run into bouts of profit-taking but nothing has altered on the fundamental front and investors are still looking for the world to be short of copper,” Chen Wenbin, an analyst at International Trade Futures Co., said from Fujian.

The metal for March-delivery on the Shanghai Futures Exchange lost as much as 0.9 percent to 68,200 yuan （$10,245） a ton before trading at 68,600 yuan. Futures on the Comex in New York dropped as much as 0.8 percent to $4.1775 a pound and last traded at $4.1925.

Analysts including those at UBS AG and Standard Chartered Plc are forecasting higher copper prices next year on expectations of a shortfall. UBS this week raised its 2011 estimate to $4.15 a pound （$9,150 a ton） from $3.68, while Standard Chartered raised its forecast for next year to $8,825 a ton from $8,375.

The copper shortage in 2011 will be 500,000 tons, compared with a deficit of 200,000 tons this year, according to BNP Paribas SA, which also forecast a shortfall in 2012.

Copper Stockpiles

Copper inventories in warehouses monitored by the London Metal Exchange have plunged 30 percent this year, heading for the first annual decline since 2004, and were at a 14-month low of 350,900 tons yesterday. One unidentified company held 90 percent or more of the exchange’s stockpiles, bourse data show.

“I highly doubt it’s one player trying to squeeze the market,” said Ji Xianglong, an analyst at Xinhua Futures Co. “It could tighten short-term supply but the outlook for the longer term is for a supply shortage anyway and that is what’s driving prices to record levels.”

The so-called dominant position indicated in the Warrant Cash Banding Report was previously 50 percent to 79 percent and moved to the higher band on Dec. 10, according to data from the bourse. The figure includes stockpile holdings and open positions for the next three trading days.

Aluminum in London rose 0.3 percent to $2,358 a ton, zinc gained 0.4 percent to $2,309 a ton and nickel climbed 0.3 percent to $24,575 a ton. Lead fell 0.8 percent to $2,430.50 a ton, while tin dropped 0.3 percent to $26,160 a ton.

--Editor: Matthew Oakley.