METALS-Copper rises to 3-month high as inventories fall

Wed Jul 28, 2010 5:57pm EDT

 * Inventories fall as metal continues to leave warehouses
 * US durable goods fall unexpectedly in June
 * Fed's Beige Book shows US grew unevenly in recent weeks
 * Coming Up: US weekly first-time jobless filings on Thur
 (Recasts, updates prices and market activity to New York
close; new byline, changes datline previous LONDON)
 By Carole Vaporean
 NEW Y0RK, July 28 (Reuters) - Copper jumped on Wednesday,
matching its May 10 high as global inventory drawdowns and
gains in the euro boosted the red metal despite a surprise
decline in U.S. orders for long-lasting goods.
 Inventory draws in Shanghai indicated strong demand in
China, the world's top copper consumer. The Chinese central
bank said on Tuesday the country would not have a double-dip
recession, even though economic growth would slow from its
recent fevered pace.
 Benchmark copper for three-month delivery on the London
Metal Exchange CMCU3 closed at $7,165 a tonne, up from $7,059
at the close on Tuesday, after matching the high from May 10 at
$7,205 per tonne.
 In late business, the euro pared its gains and so did
copper prices.
 Despite conflicting readings on the economy, consistent
declines in warehouse inventories have underpinned copper.
 London Metal Exchange copper warehouse stocks have fallen
sharply to 411,425 tonnes, down 2,375 tonnes on Wednesday, from
a 6-1/2-year high set at 555,075 tonnes in mid-February.
 "China's LME (warehouse) movements are going to drive this
price over absolutely everything else," said Frank McGhee, head
precious metals trader with Integrated Brokerage Services LLC
in Chicago. "The outflows are flying in the face of all the
rest of the markets right now."
 Copper prices shrugged off a surprising drop in orders for
durable manufactured U.S. goods. New orders for U.S.
manufactured durable products fell for a second straight month
in June, posting their largest decline since August. (STORY:
[ID:nN2796989] TABLE: [ID:nCLASIE62J] )
 The dollar fell against the euro as the
weaker-than-expected reading on orders for U.S. durable goods
added to fears about the U.S. economic outlook. [USD/] The
euro's earlier gains made copper prices more attractive in
euro-based markets.
 Some analysts pointed out that underlying manufacturing
results in the U.S. report were actually positive, boding well
for economic growth and demand for copper.
 "If you strip out aircraft and defense, you're left with a
respectable rise of 0.6 percent. That core figure is
encouraging, and if you look on a year-on-year basis, it's up
15.2 percent. That's consistent with a strong recovery in
industrial production and durable goods orders," said Michael
Woolfolk, senior currency strategist, BNY Mellon, New York.
 In after-hours trade, copper prices briefly added to
closing levels after the Federal Reserve released its Beige
Book survey of regional economic growth.
 Overall, the U.S. economy kept growing in recent weeks, but
unevenly, and actually slowed in a few regions as housing
markets softened once a popular tax break ended, the Federal
Reserve said. [ID:nN28200227]
 China's central bank said on Tuesday that Chinese economic
growth would slow, but there would be no double-dip in the
economy. [ID:nTOE66Q07U] These remarks followed well received
comments last week from Premier Wen Jiabao, who said China
would keep working to boost consumption.
 "There's some seasonal weakness coming through, but
generally I don't think there are any great worries about
China," said Robin Bhar, an analyst at Credit Agricole.
 Often seen as an indicator of economic activity, China's
benchmark Shanghai Composite Index rose more than 2 percent to
a two-month closing high. [ID:nTOE66R061]
 "Sentiment has turned bullish again this morning following
comments from the Peoples Bank of China regarding the nation's
economic outlook," said James Moore, analyst at
BaseMetals.com.
 Among other metals, aluminium traded at $2,068 versus
$2,056, down from an earlier two-month high at $2,086.
Steel-making ingredient nickel was at $20,405 from $20,550,
while battery material lead traded at $2,017.50 from $1,977.
Zinc rose to $1,955 a tonne from $1,910, earlier touching its
highest level since May 17 at $1,967.75. Tin edged down to
$19,525 from $19,550 a tonne.
 For a story on the LME's tie-up with the Singapore
Exchange, click [ID:nSGE66R00Y] [ID:nLDE66Q16K]
Metal Prices at 3:10 EDT (2010 GMT)
Metal         Last      Change  Pct Move   End 2009   Ytd Pct
                                                      move
 COMEX Cu    323.80       -0.75     -0.23     334.65     -3.24
 LME Alum   2065.00        9.00     +0.44    2230.00     -7.40
 LME Cu     7170.00      111.00     +1.57    7375.00     -2.78
 LME Lead   2010.00       33.00     +1.67    2432.00    -17.35
 LME Nicke 20400.00     -150.00     -0.73   18525.00     10.12
 LME Tin   19450.00      120.00     +0.62   16950.00     14.75
 LME Zinc   1950.00       40.00     +2.09    2560.00    -23.83
 SHFE Alu  15480.00      180.00     +1.18   17160.00     -9.79
 SHFE Cu*  56200.00     1100.00     +2.00   59900.00     -6.18
 SHFE Zin  16215.00      330.00     +2.08   21195.00    -23.50
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
 (Additional reporting by Michael Taylor and Rebekah Curtis in
London; Editing by David Gregorio)



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