Copper Snaps 3-Day Drop on China Demand; Nickel Rises to Record

Copper snapped a three-day decline in London as data showed signs of rising demand from China, the world's largest user of the metal. Nickel advanced to a record and lead posted the largest intraday gain in 10 months.

China imported 81 percent more copper in January than a year earlier, according to the Beijing-based customs office. Metal stockpiles tracked by the London Metal Exchange dropped 1.8 percent in February, the first decline in five months. Orders for the metal inventory, known as canceled warrants, have more than doubled this year, LME data show.

"The declining inventory and a jump in canceled warrants probably are influenced by Chinese buying,'' said Michael Widmer, the London-based head of metals research at LME member, Calyon.

Copper for delivery in three months on the LME rose $85, or 1.4 percent, to $6,100 a metric ton as of 1:34 p.m. local time. Earlier, the contract gained as much as 3.1 percent to $6,200. It climbed 4.9 percent in February, the first monthly gain in seven. The metal for May delivery on the Comex division of the New York Mercantile Exchange gained 1.2 percent to $2.765 a pound as of 8:12 a.m. local time.

Prices of copper, used in wires and pipes, have quadrupled in the past five years, on stronger demand from China and the U.S. The gains spurred increased production and new mining projects, creating a surplus of 847,000 tons last year, according to a report released yesterday by Merrill Lynch & Co.

China's imports of refined copper and alloys rose to 136,401 tons in January. Imports are unlikely to drop in February and March, said three Chinese traders, including Yuan Fang at Shanghai Dongya Futures Co. Imports fell 31.5 percent last year.

Stockpiles Drop

Copper stockpiles fell 2,575 tons, or 1.2 percent, to 205,400 tons, the LME said today in a daily report. That's a fourth consecutive session of declines, bringing the stockpiles to the lowest since Jan. 25. Orders for the stockpiles jumped to 19,950 tons, from 7,275 tons at the end of last year.

Nickel, whose gains exceed all other LME metals in the past year, gained to a record as a shortage of the metal on the exchange persisted for a 10th month, forcing buyers seeking immediate delivery to pay $3,300 a ton more than those purchasing the three-month futures.

Nickel for delivery in three months added as much as $805, or 1.9 percent, to $42,200 a metric ton. That beat the Feb. 27 record by $210. LME-monitored stockpiles of the metal, used in stainless- steel production, have plunged 90 percent in the past year to 3,342 tons, or below one day of global consumption.

``Nickel is our favorite at the moment,'' John Meyer, an analyst at Numis Securities Ltd., said in an interview today in London. ``Nickel stocks are critically low and demand for stainless-steel raw materials is very strong.''

Nickel Record

Production will lag behind consumption this year by 22,000 tons, rising to 47,000 tons in 2008, Surrey, England-based metals consulting company Brook Hunt said yesterday, according to a TD Newcrest report. Brook Hunt, which has tracked the metals industry since 1975, declined to release the report to non-clients.

Lead, used in car batteries, gained after stockpiles tracked by the LME fell 475 tons, or 1.5 percent, to 31,625 tons, the lowest since June 1, 2005. The contract for delivery in three months rose as much as 6 percent to $1,930 a ton, the largest intraday gain since April 21.

Metals gains may not hold if U.S. manufacturing data show a second monthly contraction, David Thurtell, an analyst at BNP Paribas in London, said today by phone. The Institute for Supply Management is forecast to say that manufacturing showed no improvement in February, according to a Bloomberg News survey, after a contraction in January.

``The worry is about contagion,'' said Thurtell. ``The U.S. weakness could spread to other regions including China.''

The U.S. is the world's second-largest user of copper.

Also on the LME, aluminum added $15 to $2,825 a ton, zinc increased $30, or 1.9 percent, to $3,510 and tin jumped $230, or 1.7 percent, to $13,380.

To contact the reporters on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net