Shanghai Copper Rises to Record as Funds Increase Investment
April 4 (Bloomberg) -- Copper futures in Shanghai rose to a record as investors increased purchases of metals to diversify their assets and seek higher returns than stocks and bonds.
Copper has also risen to records in London and New York this week as fund managers pour money into metals amid supply shortfalls and forecasts of rising demand fueled by global growth. The International Monetary Fund may raise its economic forecast for Asian growth on expansion in Japan and the U.S.
``The funds are likely to keep buying metals like copper, as overall macroeconomic indicators are still positive,'' Zhong Min, futures trading manager at Jinrui Futures Co. in Shanghai, said by phone today.
Copper for delivery in June rose as much as 2,000 yuan, or 4 percent, to a record 52,000 yuan ($6,483) a metric ton on the Shanghai Futures Exchange. That's the maximum daily percentage gain allowed on the exchange. The metal traded at 51,880 yuan at the 11:30 a.m. local time break.
Asian stocks rose for a second day, extending 16-year highs as commodity producers such as BHP Billiton and Sumitomo Metal Mining Co. led gains as prices of metals surged.
Prices of copper, aluminum, tin, zinc and lead rose in New York and London yesterday. A measure of six metals traded on the London Stock Exchange, including copper and zinc, jumped 3.4 percent, the biggest percentage gain since Oct. 29, 2004.
U.S. Growth
The IMF may increase forecasts for Asia, excluding Japan, and global growth this year in its semi-annual World Economic Outlook due April 20, Wanda Tseng, deputy director of the IMF's Asia and Pacific department said. The Washington-based IMF on Sept. 21 forecast Asian economies would expand 6.9 percent in 2006 and project world growth at 4.3 percent.
``We believe the outlook for base metals remains extremely constructive,'' Barclays Capital said in a e-mailed report yesterday. ``Higher commodity prices themselves reflect stronger-than-expected growth outside the U.S. We now expect the (U.S.) economy to grow a bit more strongly in the near-term.''
Nonresidential construction spending, which includes office buildings, factories, and schools, rose 0.1 percent in February, the U.S. Commerce Department said yesterday in Washington. Compared with the same month a year earlier, nonresidential construction increased 7.9 percent.
A survey yesterday showed manufacturing in Europe expanded at the fastest pace in five years in March. Copper is used in pipes and wiring and buildings.
Copper has jumped 36 percent in Shanghai and 32 percent in London since the end of November. The Standard & Poor's 500 Index has risen 4.6 percent, and holders of the benchmark 10- year U.S. Treasury lost 1.6 percent in the same period.
Mine Shortfalls
Copper rose to a record in London and New York yesterday amid concern unexpected mine delays will lead to shortfalls. Chile's Collahuasi mine will lose as much as 10,000 metric tons of copper output after an electrical failure, spokesman William Gysling said March 31. Workers at Grupo Mexico SA's La Caridad mine went on strike last week.
Copper for delivery in three months was bid at $5,605 a ton and offered at $5,615 on the London Metal Exchange at 12:26 p.m. Shanghai time. It jumped $225, or 4.2 percent, yesterday to $5,615, after touching a record $5,616 earlier. It first traded above $5,000 on Feb. 2.
Citigroup Inc. estimates $200 billion are invested in global commodities, compared with $45 trillion in equities and $9.2 trillion in bonds. About $2.8 trillion is invested in shares of energy, metals and mining companies. Fund investments in commodities will gain almost 50 percent this year, Standard Bank Group Ltd. in London predicts.
Index Funds
Funds often invest in commodities through an index that tracks a basket of products. The Goldman Sachs Commodity Index, which tracks energy, metals and agricultural products, rose 39 percent last year, sparking concern for accelerating inflation.
``Index funds keep pushing copper prices ever since it rose above $5,000 a ton,'' Jinrui's Zhong said.
Copper for May delivery rose as much as 0.75 cent, or 0.3 percent, to $2.5550 a pound in after-hours trading on the Comex division of the New York Mercantile Exchange. The futures traded at $2.5525 at 12:25 p.m. Shanghai time. It rose to a record $2.5605 yesterday.
Aluminum for delivery in June rose as much as 370 yuan, or 1.9 percent, to 20,290 yuan a ton on the Shanghai Futures Exchange. That's the biggest gain in seven days.
Zinc for three-month delivery rose $95, or 3.6 percent, to $2,740 a ton yesterday on the LME. The metal earlier rose to a record $2,750 yesterday.