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Copper, Aluminum Rise to 9-Year Highs as Inventories Slump
Oct. 7 (Bloomberg) -- Copper and aluminum futures rose to nine-year highs in London as growth in worldwide demand, led by China, forced users to drain inventories of metals needed in construction and manufacturing.
Copper stocks in warehouses monitored by exchanges in London, New York and Shanghai have plummeted about 80 percent this year to 164,724 metric tons, about four days' global use. BHP Billiton and other miners have failed to keep up with demand, spurring speculators to increase bets on rising prices.
``Most commodities show under-investment in new capacity, not only in China, but the western world,'' Ingrid Sternby, an analyst at Barclays Capital in London, said in a telephone interview.
Rising metals prices have bolstered shares of producers and dented earnings for users like Electrolux AB, the world's largest maker of household appliances. China's demand for commodities has surged in the past two years, making the country the world's biggest consumer of copper, aluminum, steel, iron ore and coal.
Copper for delivery in three months rose as high as $3,065 a metric ton on the London Metal Exchange, $7 below the peak reached in January 1995. The metal traded up $14, or 0.5 percent, at $3,052 a ton at 9:27 a.m.
China, the fastest-growing of the world's 20 largest economies, uses about 30 percent of the copper it imports to make power cables for its expanding grid. In the U.S., the second- biggest copper market, 40 percent of supplies to go to builders, with the average home requiring 400 pounds of wire and pipe.
China's economy grew 9.7 percent in the first half. The U.S. economy, the world's largest, may have expanded 3.7 percent in the third quarter, according to economists surveyed by Bloomberg. Japan also is using more copper, and growth in Brazil, Argentina and Chile is curbing exports, said John Meyer, an analyst at Numis Corp. in London.
Inventories Slide
Copper inventories at LME warehouses have slipped 6.6 percent in the past three days to 93,625 tons. Output from mines and scrapyards this year may be 950,000 tons less than demand of 16.8 million, London-based Bloomsbury Minerals Economics Ltd. said this week, predicting the deficit may last until 2006.
Chile's Codelco, Phelps Dodge Corp. and other producers are expanding mines to try to meet demand. Copper miners operated at 93 percent of capacity in June, up from 89 percent in January, Meyer said.
``This may not be sufficient to return the market to a supply demand balance next year,'' Meyer said in an e-mailed note. ``Producer inventories are also thought to be relatively low as miners and traders have already taken advantage of high price levels.''
Aluminum Rises
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