Copper Climbs to Record on Outlook for Demand as LME Reopens After Holiday

Copper jumped to a record on the London Metal Exchange and advanced to a 3-1/2 year high in Shanghai on speculation that global supplies will fail to keep pace with demand as the global economy extends a recovery.

Three-month copper in London gained as much as 1.3 percent to $9,725 a metric ton, catching up with yesterday’s rise to an all-time high in New York as the LME reopened after a holiday. Comex futures rose to $4.4980 a pound after a report showed U.S. manufacturing grew at the fastest pace in seven months.

“The fundamental picture is definitely supportive, however, we are cautious about how quickly prices are moving higher,” Cheng Xiaoyong, an analyst at Baocheng Futures Co., said from Zhejiang. “This makes the market vulnerable to a sharp correction in the near term.”

Copper, often used as an economic gauge because it’s mainly used in construction and electrical applications, surged 30 percent in 2010 as the global economy recovered from the worst recession since World War II. A report today may show orders placed with U.S. factories fell at a slower pace. The U.S. and China are the world’s two biggest copper consumers.

The metal for April-delivery on the Shanghai Futures Exchange, which was also shut yesterday, was little changed at 72,480 yuan （$10,971） a ton, after gaining as much as 0.9 percent to 73,030 yuan, the highest level since May 2007. The LME contract traded at $9,690 a ton at 10:24 a.m. in Singapore.

“The market risks demand destruction at these prices and the seasonal stockpiling before Chinese New Year may not be as robust this year,” said Cheng. Copper consumers buy metal before the week-long Chinese holiday, which runs from Feb. 2, for use when production resumes after the break.

Copper Stockpiles

Inventories monitored by the Shanghai Futures Exchange climbed to a six-month high of 131,891 tons last week, while stockpiles in LME warehouses rose for a 13th session on Dec. 31 to the highest level in three months. Still, LME copper stockpiles fell last year for the first time since 2004.

Supply disruptions in Chile, the world’s largest producer, are also helping to support prices. Anglo American Plc and Xstrata Plc’s Collahuasi mine, which shut its main port two weeks ago after an accident, may miss some deliveries even as it starts shipments from an alternative port. A Dec. 29 accident at Codelco’s Chuquicamata refinery has also curbed output.

Aluminum in London rose 0.2 percent to $2,476 a ton, lead climbed 0.6 percent to $2,565 a ton and nickel gained 0.4 percent to $24,849 a ton. Zinc fell 1 percent to $2,430 a ton, while tin hadn’t traded.