Copper Rises Most In 7 Weeks on Signs Of Improved U.S.Demand

[Ardent Listener]

Copper Rises Most in 7 Weeks on Signs of Improved U.S. Demand

By Millie Munshi

Aug. 31 (Bloomberg) -- Copper rose the most in seven weeks as U.S. government reports showing improved consumer spending and tame inflation eased concern that a slowdown in new-home construction will curb demand for metals.

Personal spending climbed the most since January and a gauge of prices posted the smallest gain of the year, the Commerce Department said today. The data suggest interest rates may remain steady, softening a slump in the housing market. Prices have more than doubled in the past year as demand surged from builders, the biggest users of the metal.

``The U.S. is still a huge consumer of copper,'' said Mark Lewon, vice president of operations at Utah Metal Works Inc., a scarp-metal recycler and broker in Salt Lake City. ``We need people to keep spending on housing and durable goods to keep up copper demand.''

Copper futures for December delivery rose 14.75 cents, or 4.4 percent, to $3.50 a pound at 12:12 p on the Comex division of the New York Mercantile Exchange. A close at that price would be the biggest gain since July 6. Prices have fallen 14 percent since reaching a record high of $4.04 on May 11.

Copper for delivery in three months rose $250, or 3.4 percent, to $7,700 a metric ton at 5:12 p.m. on the London Metal Exchange.

The inflation data was ``surprising,'' said Marc Kaplan, a scarp metals trader at Mews Metal Trading in Verona, New Jersey. Traders have been watching inflation and interest rates for hints at the pace of housing demand, he said.

Housing Demand

``Housing prices have gone down dramatically and there are lots of houses for sale,'' Kaplan said. ``Of course that's going to affect copper.'' Steady interest rates may slow the decline in housing, he said.

Prices fell yesterday after BHP Billiton and union officials reached a preliminary agreement that could end the strike at Chile's Escondida mine, the world's biggest source of the metal.

Workers are set to vote today on a new labor contract, ending a 25-day strike that cut output by half. BHP, the world's biggest mining company, agreed to increase wages by 5 percentage points above inflation and pay a bonus of 9 million Chilean pesos ($16,705), company spokesman Mauro Valdes said yesterday from Santiago.

``The industry has been anticipating a relatively quick end to this Escondida strike for a while,'' said Dan Vaught, a commodity analyst at A.G. Edwards & Sons Inc. in St. Louis. ``Most people who were willing to sell on that news did it yesterday.''

Also on the LME, lead rose $27 to $1,242 a metric ton, nickel added $150 to $27,650 a ton, tin was $175 higher at $9,025 a ton, zinc advanced $30 to $3,370 a ton and aluminum gained $10 to $2,495 a ton.

To contact the reporter on this story: Millie Munshi in Chicago at mmunshi@bloomberg.net

Last Updated: August 31, 2006 12:15 EDT

[oroborean]

the picture for new housing contruction looks bleak to me, but i suppose their are people who believe a "soft landing" is possible at least in select local markets. still, i believe the price of copper will be much more levered to the global economy than the u.s. housing market. it's unclear what effect a housing slowdown here will have on the whole world, but there are already some who can see the ripples moving outward.

sure, silver has industrial value and so may trade nominally with other industrial materials. my experience, however, is that silver reacts far more reliably with gold and oil, but that over the past year or so, silver has moved based on it's own supply and demand fundamentals so as to be almost indifferent to gold and copper. declines in these other metals might even generate some new hot money for silver. my primary concern is that mining in general is still considered a good sector for investment and speculation, as mining stocks are an excellent way to game the daily fluctuations of these commodities, but the sector is not without some vulnerabilities including production costs and taxation or repatriation by foreign governments. i believe if mining stocks are still a positive play in the minds of investors, this is bullish for silver and vice versa.