Copper Advances on Expected Supply Shortfall; Aluminum Climbs

Bloomberg Jan 18---Copper advanced from London to Shanghai as an expected global supply deficit this year and gains in Asian equities today helped support prices. Aluminum also advanced.

Three-month copper on the London Metal Exchange gained as much as 0.6 percent to $9,687 a metric ton and traded at $9,680 at 3:15 p.m. Singapore time. April-delivery metal on the Shanghai Futures Exchange closed 1 percent higher at 72,000 yuan （$10,935） a ton.

“The metal now seems to have lost the momentum to edge to new records, but positive fundamentals are helping it find support at the current level,” said Wang Ning, an analyst at Xiangyu Futures Co. “We also have good outside markets today, unlike yesterday.”

The global refined-copper market may have a deficit of 500,000 tons to 600,000 tons in 2011, according to JPMorgan Securities Ltd. Macquarie said in a research report on Dec. 27 that the shortfall would be 550,000 tons. The International Copper Study Group has predicted a shortage of 435,000 tons.

Morgan Stanley today raised its copper and gold forecasts through 2015. The bank wrote in a research report that copper is likely to average $4.45 a pound in 2011, up 24 percent from an earlier estimate.

Asian stocks advanced, led by technology companies, on speculation that dynamic random access memory chip prices will increase. The MSCI Asia Pacific Index advanced as much as 0.7 percent. The Shanghai Composite Index gained 0.1 percent at the 3 p.m. close, rebounding from a 3 percent drop yesterday.

China Demand

Foreign direct investment in China rose to a record $105.7 billion last year, underscoring confidence that rising incomes will boost demand in the world’s fastest-growing major economy.

In Chile, Anglo American Plc and Xstrata Plc’s Collahuasi venture said yesterday that it signed an agreement with the port of Arica after an accident shut its Patache facility, easing concerns that supplies from the world’s biggest copper producer would be disrupted.

Zinc in London fell 0.6 percent to $2,439.50 a ton, while lead gained 0.2 percent to $2,646.50 a ton. Aluminum rose 0.5 percent to $2,446 a ton, while nickel increased 0.6 percent to $26,00 a ton. Tin fell 0.3 percent to $26,880 a ton.

Asian trading of the London Metal Exchange’s benchmark three-month contracts increased last year, making up 14 percent of total volume on the Select electronic system, according to Liz Milan, managing director for LME Asia.

This compares with about 9 percent to 10 percent in 2009, Milan said in an interview in Singapore today, referring to transactions between 1 a.m. and 7 a.m. London time.