Copper Rises for Second Day as Low U.S. Borrowing Cost May Stoke Metal Use

Copper rose the most in two weeks on speculation that low U.S. borrowing costs will buoy demand for industrial metals.

The Federal Reserve kept its benchmark rate close to zero percent yesterday and maintained a pledge to hold lending costs “exceptionally low” for an “extended period.” Copper has declined 2.4 percent this month, partly on speculation that higher rates would hinder an economic recovery in the U.S., the world’s biggest metal user after China.

“The worry had been that growth in the U.S. would lead to a move to higher interest rates by the Fed,” said Daniel Brebner, an analyst at Deutsche Bank AG in London. “That opinion seems to be changing modestly with the Fed comments.”

Copper futures for March delivery advanced 7.15 cents, or 1.7 percent, to close at $4.3385 a pound at 1:29 p.m. on the Comex in New York, the biggest gain since Jan. 11.

The metal jumped 33 percent last year as government spending buoyed the global economy and consumption surged in China. Inventories tracked by exchanges in London, Shanghai and New York have tumbled 22 percent since April 1 as miners raced to keep up with climbing demand. The price reached a record of $4.498 on Jan. 3.

“We are going to be in a fairly significant deficit this year, and certainly next year,” said Wayne Atwell, a managing director at Casimir Capital LP in New York. “The industry is aggressively trying to find new deposits, but there’s no major new deposit on the horizon. There are a lot of reasons why copper is going to go higher.”

Copper will average $4.25 in 2011 as the global economy grows and construction recovers in developed countries, Caterpillar Inc., the world’s largest maker of mining equipment, said today in its fourth-quarter earnings statement. The metal averaged about $3.44 last year, Bloomberg data show.