Copper Rises on Expectations That U.S. Demand Will Strengthen
By Halia Pavliva and Millie Munshi
April 9 (Bloomberg) -- Copper prices in New York rose to a five-month high on expectations that demand in the U.S., the world's second-biggest user after China, will strengthen as inventories decline.
U.S. employers added more workers than forecast in March and the jobless rate matched a five-year low, the Labor Department reported on April 6, when the main copper markets in the U.S. and Europe were closed for the Easter holiday. The report showed U.S. homebuilders, major copper users, increased hiring. Inventories monitored by the London Metal Exchange, the world's largest metals market, fell 2.6 percent in the first quarter.
``The market has been supported by very positive economic news,'' particularly the U.S. unemployment report, said John Gross, director of metals management at Scott Brass Inc. in Cranston, Rhode Island. Copper prices have also been supported by falling inventories, he said.
Copper futures for May delivery rose 12.9 cents, or 3.8 percent, to $3.506 a pound on the Comex division of the New York Mercantile Exchange, the highest close for a most-active contract since Oct. 19.
The increase in U.S. employment in March, the most in three months, followed a gain in February that was larger than previously estimated, according to the Labor Department report. The jobless rate fell to 4.4 percent, a level last seen in October, defying predictions it would climb.
Copper prices have surged 26 percent in the past month and have gained for five straight weeks, the longest rally since May.
`Insane' Rally
``Prices have gone up so quickly it's insane,'' said Marc Kaplan, president of Mews Metals Trading LLC in Verona, New Jersey. ``This is severe volatility and it's very difficult to operate a business this way. We're purchasing material every day to try and have a position that will at least let us get some sleep at night.''
The run-up in prices is adding risk to the market and is a reflection of demand from hedge funds and speculators rather than physical buyers, Kaplan said.
``Demand is not where these prices are,'' he said. ``One of these days we could come into work and see the price down 20 cents if the funds decide they're going to start pulling money off the table.''
The U.S. buys about 13 percent of the 17 million metric tons of copper sold annually, while China accounts for about 20 percent of global demand, according to Prudential Equity Group LLP.
Copper stockpiles monitored by the LME declined 0.7 percent to 178,975 metric tons on April 5. The LME is closed today for the Easter holiday.
