Copper Jumps Most in 3 Weeks as Metal Use in China May Rebound

By Millie Munshi

March 3 (Bloomberg) -- Copper prices jumped the most in three weeks on speculation that demand will rebound in China, the world’s largest user of the metal.

China’s economy will improve this year as 4 trillion yuan ($585 billion) of stimulus spending takes effect, government officials said today. The country’s copper buying has a “long way to go,” Scotia Capital Inc. said. Prices climbed 7.4 percent last week on speculation that government spending in the U.S. and China will revive the global economy and lift metals consumption.

“Commodities are bouncing, with copper in particular,” after the comments from Chinese officials, Peter Boockvar, an equity strategist at Miller Tabak & Co. in New York, said in an e-mailed note today. “It implies that China will do and spend everything possible” to boost its economy, Boockvar said.

Copper futures for May delivery rose 8.85 cents, or 5.8 percent, to $1.6045 a pound on the New York Mercantile Exchange’s Comex division, the biggest gain for a most-active contract since Feb. 6. Copper still is down 62 percent since reaching a record $4.2605 on May 5, as the global economy slipped into recession.

China’s refined copper imports may total 2 million metric tons this year as the country’s State Reserve Bureau adds to stockpiles, Macquarie Group Ltd. analysts led by Jim Lennon in London said in a report today. That’s up from 1.4 million tons last year, Lennon said.

“It looks like China is coming back to the market as a bigger player,” said Michael Gross, an analyst at OptionSellers.com in Tampa, Florida. “They are probably adding to reserves. China’s economy is still growing, so there will be some more demand there.”

LME Stockpiles

Copper also gained as canceled warrants, or the amount earmarked for withdrawal from warehouses registered with the London Metal Exchange, tripled to 55,025 tons in the past week, LME data show. That accounts for more than 10 percent of the exchange’s total 530,875 tons of inventory.

“Canceled-warrants data provides a good indication of just how much demand there is to take material from LME warehouses in the near term,” Lennon said. “We view this as a significant, bullish short-term signal.”

The Chinese government’s stockpiling of copper may mean the withdrawal of about a quarter of the metal held in LME warehouses, according to Ebullio Capital Management LLP, a commodity hedge fund.

Copper’s advance was limited today as a report showed fewer Americans than forecast signed contracts to buy previously owned homes in January. Builders are the biggest consumers of the metal, using about 400 pounds for pipes and wires in the average U.S. home.

Home Resales

The index of pending home resales fell 7.7 percent after a 4.8 percent gain in December, the National Association of Realtors said today in Washington. Economists forecast a 3.5 percent drop, the median in a Bloomberg News survey of 32 economists.

While Chinese buying will help copper, “underlying demand remains very weak” and will cap price gains, Greg Barnes, an analyst at TD Newcrest Inc. in Toronto, said today in an e-mailed note.

On the LME, copper for delivery in three months rose $154, or 4.6 percent, to $3,539 a metric ton ($1.61 a pound). The price reached a record $8,940 on July 2.