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Copper, Zinc Climb to Records in London Amid Supply Concern
April 10 (Bloomberg) -- Copper rose to a record, leading a rally in metals as investors bet returns on commodities will beat those on stocks and bonds. Zinc climbed to the highest ever, and nickel jumped the highest since 1989.
Copper rose after the government failed to intervene in a 17- day strike at Grupo Mexico SA's La Caridad mine, the nation's second-largest copper mine, while a leak at a Lonmin Plc platinum plant in South Africa disrupted production. Rising demand from hedge and mutual funds has helped drive copper 79 percent higher in the past 12 months. Zinc has more than doubled.
``The demand story is very robust,'' said Alfred Wong, who helps manage $12 billion at UOB Asset Management in Singapore. , ``We are quite upbeat.''
Copper for delivery in three months rose $185, or 3.2 percent, to $5,910 a metric ton on the London Metal Exchange, after earlier reaching a record $5,965. Zinc jumped $100, or 3.6 percent, to $2,911 a ton after reaching a record $2,927. Nickel climbed 3.4 percent to $17,425 a ton after reaching $17,650, the highest since March 1989.
On the Comex division of the New York Mercantile Exchange, copper for May delivery climbed 6.85 cents, or 2.6 percent, to $2.709 a pound ($5,973 a ton) after reaching $2.712. Prices reached a record $2.7275 after the close of floor trading.
A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.
The work stoppage at Grupo Mexico's La Caridad copper mine continued over the weekend with no intervention from the Mexican government, spokesman Juan Rebolledo said yesterday. The strike over improved conditions and new contracts began March 24.
Commodity Rally
The Goldman Sachs Commodity Index, which includes copper, zinc and gold, has advanced 22 percent in the past year, more than double the gain in the Standard & Poor's 500 Index of stocks. Benchmark U.S. Treasuries have lost investors about 1.6 percent this year, according to Merrill Lynch & Co. indexes.
Precious metals climbed with gold on the Comex closing above $600 for the first time in 25 years. Silver gained for the third- straight session, extending a rally to a 22-year high.
Gold futures for June delivery rose $9.10, or 1.5 percent, to $601.80 an ounce, more than making up for the 1.2 percent drop on April 7. The metal is up 16 percent this year.
Silver for May delivery rose 49 cents, or 0.9 percent, to $12.56 an ounce. Prices have surged 72 percent in the past 12 months.
Pittsburgh, Pennsylvania-based Alcoa Inc., the world's largest aluminum producer, is expected to report today a jump in first- quarter profit because of higher prices. Aluminum, which reached a 17-year high of $2,678.10 a metric ton on the LME Feb. 7, today rose $34, or 1.3 percent, to $2,574 a ton.
Economic Growth
The booming economies of China and India are stoking demand for the raw materials needed for factories, cars and appliances. China's economy expanded 9.9 percent last year and is headed for similar growth this year.
The International Monetary Fund said last week it may raise its forecast for global economic growth this year. The world economy may expand 4.9 percent, it said April 3. It forecast on Sept. 21 that growth would be 4.3 percent.
``For the first time in 15 years, all major economies are growing together in both North America, China and Europe,'' said John Kemp, an analyst at Sempra Metals in London.
Kemp forecasts copper may rise to as high as $7,000 a ton this year. Gary Lampard, an analyst at Canaccord Capital Inc., Canada's largest independent brokerage, increased his forecasts for base- metal prices. The gains are being ``heavily influenced by speculative activity,'' he wrote in a report today.
Investment Funds
Fund investments in commodities are forecast by Barclays Capital to climb by more than a third to $140 billion this year. Merrill Lynch said Feb. 8 money managers should invest directly in commodities, rather than energy and mining stocks, to take advantage of rising prices.
Copper inventories monitored by the LME has dropped for six consecutive trading days, shedding 8.3 percent to 111,800 tons. That's less than three days of global consumption. Zinc stockpiles have plunged 53 percent in the past year to 267,650 tons, equal to less than 10 days of global consumption.
Nickel gained amid disruption to the building of Inco Ltd.'s Goro project in New Caledonia. Goro, due to produce 60,000 tons a year by late 2007, is being hampered by protests of anti-mine activists. Investors also are stocking up before a labor contract expires at Inco's main operations in Canada in May, said Maqsood Ahmed, an analyst at Calyon Corporate and Investment Bank in London.
A three-month strike at Inco's Ontario mine from June 2003 sent prices to more than a three-year high that year.
Inventories of nickel fell for the seventh straight trading day, declining 10 percent in the period to 29,430 tons, LME data shows. That's less than eight days of global consumption.
Platinum rose $29, or 2.7 percent, to $1,094.50 an ounce in London, after earlier reaching $1,095.50.
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