Copper Gains as Dollar Drop Boosts Investment Appeal; Aluminum, Zinc Rise

Copper advanced in London as the dollar weakened against its major counterparts, raising the investment appeal of the metal. Aluminum and zinc also gained.

The metal for three-month delivery climbed as much as 1.3 percent to $8,514.75 a metric ton on the London Metal Exchange, and traded at $8,493.5 by 12:04 p.m. in Shanghai. Aluminum increased 2 percent to $2,305 a ton, and zinc gained 2.1 percent to $2,205 a ton.

“Copper is seeking direction amid an unclear macro picture in China, so it’s prone to be moved by the dollar and outside markets in the short term,” Liang Haisan, an analyst at CITIC Newedge Futures Co., said by phone from Shanghai.

The U.S. currency fell versus 14 of its 16 most-traded counterparts before the Federal Reserve releases minutes of this month’s Federal Open Market Committee meeting. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, declined for a fourth day, losing 0.5 percent to 78.096.

Concern that tightening measures to cool inflation in China may have a significant negative impact on demand for commodities is somewhat exaggerated, JPMorgan Chase & Co. said in a research note sent by e-mail today.

“While the property sector in China will likely slow going into 2011 and there may be oversupply concern in the sector next year, there are enough infrastructure projects in the pipeline to ensure that that fundamentals for China’s commodity demand will remain strong next year,” the report said.

Ratio Hike

China, the world’s largest metals consumer, ordered banks to set aside larger reserves for the second time in two weeks, by raising the requirement 50 basis points starting Nov. 29, the central bank said on its website after Chinese markets closed Nov. 19. The aim is to step up liquidity management and “appropriately control” credit and loans, it said.

China’s reserve-ratio increase provided temporary relief to the market today, Tan Wentao, an analyst at HNA Topwin Futures, said by phone from Shanghai. “In this round of price controls, agricultural products are in focus, so metals should be less affected,” Tan said.

Copper for March delivery in Shanghai dropped as much as 1.5 percent to 63,230 yuan （$9,522） a ton, and closed at 63,910 yuan for the 11:30 a.m. break.

China’s inflation may reach 6.3 percent next year, so the country may raise interest rates and the reserve requirement ratio by at least 150 basis points each over the next year to fight inflation, the Securities Times cited Tao Dong, a Credit Suisse Group AG economist in Hong Kong, as saying.

Chile Strike

In Chile, Anglo American Plc and Xstrata Plc’s Collahuasi mining unit disputed a union statement that only five or six workers had accepted a wage proposal to end a 15-day strike at the world’s fourth-largest copper mine. The figure is “substantially” more than that, company spokeswoman Bernardita Fernandez said in an e-mailed statement on Nov. 19, without saying how many had accepted the deal.

Workers have until Nov. 23 to agree to the company’s Nov. 17 offer, which includes a bonus payment of 14 million pesos （$29,154）, up from a previous offer of 13.5 million pesos.

Production continues normally at the mine and port after the company enacted a contingency plan using non-union employees.

Lead in London advanced 1.2 percent to $2,305 a ton, nickel gained 0.5 percent to $21,950 a ton, and tin increased 1 percent to $25,250 a ton.

--Helen Sun. Editors: Richard Dobson, Jake Lloyd-Smith.