Bloomberg News

Commodities Surge, Led by Metals, Oil on Chinese Manufacturing

October 24, 2011

Oct. 24 (Bloomberg) -- Commodities surged, led by copper, nickel, lead and oil after a report showed manufacturing probably expanded in China, the world’s top metal consumer and the fastest-growing user of crude.

The Standard & Poor’s GSCI Index of 24 raw materials gained 2.4 percent as copper rose to the biggest two-day rally since January 2009 and oil futures in New York increased to the highest level in 11 weeks. Commodities also rose after European governments moved closer to containing the region’s debt crisis.

Industrial metals in London jumped the most in three years, led by copper and nickel, as European leaders outlined plans to aid banks and ruled out borrowing unlimited amounts from the European Central Bank to boost a rescue fund. Chinese manufacturing may expand in October, ending the longest contraction since 2009, according to a preliminary index of purchasing managers by HSBC Holdings Plc and Markit Economics.

“China may not be suffering a hard landing or even as much of a harsh landing as previously thought,” said Aakash Doshi, a commodity strategist at Citi Global Markets in New York. “Overall, you have risk appetite in commodities being buttressed by policy makers in Europe really paying attention to sovereign restructuring and bank recapitalization plans.”

The S&P GSCI index increased to 645.45. Commodity prices have rebounded 12 percent from a 10-month low on Oct. 4. Twenty- two of the commodities in the index advanced.

European leaders held their 13th crisis summit in 21 months yesterday and debated how to cut Greece’s debt burden, boost the firepower of the region’s bailout fund and bolster banks ahead of an additional meeting on Oct. 26.

Copper Advances

Copper for delivery in three months, the biggest mover in the S&P GSCI index, gained 6.9 percent to $7,635 a metric ton ($3.46 a pound) on the London Metal Exchange at 6:15 p.m. local time, the biggest gain since Jan. 26, 2009.

Imports of refined copper by China in September rose 17 percent to 275,499 metric tons from August, customs figures showed today. Shipments were up 14 percent from a year earlier.

LME copper prices slumped 26 percent in the three months ended Sept. 30 on concern Europe’s debt crisis would cripple global economic growth, curbing metals demand.

Chinese Metals Demand

“Chinese consumers have been running hand-to-mouth for more than a year, waiting for the price pullback, which has finally come,” David Thurtell, the head of metals research at Citigroup Inc. in Singapore, said in a telephone interview.

Copper futures for December delivery rose 7 percent to close at $3.449 a pound on the Comex in New York.

Nickel jumped 6.4 percent to $19,995 a ton in London, the biggest gain since Oct. 3.

Lead rose 5.4 percent, capping the biggest two-session rally since March 2009, and tin climbed 4 percent.

Crude for December delivery gained $3.87, or 4.4 percent, to $91.27 a barrel on the New York Mercantile Exchange, the highest settlement since Aug. 3.

Futures gained after inventories at Cushing, Oklahoma, the delivery point for New York-traded oil, dropped 2.6 percent on Oct. 21 from Oct. 18, according to data compiled by DigitalGlobe Inc. Prices also advanced on signs of economic growth in both China and Japan, the second- and third-largest oil consuming countries after the U.S.

Japanese exports rose 2.4 percent in September from a year earlier as demand for cars and auto parts increased, the Ministry of Finance said in Tokyo today. The median estimate of 26 economists surveyed by Bloomberg was a 1 percent increase.

Brent oil on the ICE Futures Europe exchange increased $1.89, or 1.7 percent to $111.45 a barrel.

Gold Advances

Gold rose for a second straight session, tracking gains in others commodities, as renewed optimism for growth in China boosted prospects for raw-material demand.

Gold futures for December delivery gained 1 percent to $1,652.30 an ounce at 2:21 p.m. on the Comex in New York.

Silver futures for December delivery rose 1.4 percent to close at $31.644 an ounce on the Comex. The metal has climbed 5.2 percent this month.

Among other top movers, zinc climbed 3.9 percent to $1,875.50 a ton in London. Mines in Hunan and Inner Mongolia, China’s biggest zinc-producing provinces, are starting to cut output, according to Macquarie Group Ltd.

Aluminum rose 4.4 percent to $2,218 a ton, the biggest gain since July 2009.

Coffee, Cocoa, Sugar

Coffee futures rose to a four-week high as rain hampers the harvest in Latin America, signaling that inventories will extend a slump to an 11-year low. Sugar and cocoa also climbed.

Mario Gomez, a member of Colombia’s National Federation of Coffee Growers board, said production may slide to less than 8.5 million bags in 2011, the smallest crop in two years. A bag weighs 60 kilograms, or 132 pounds. Arabica supplies in warehouses monitored by ICE Futures U.S. have fallen 22 percent this year to the lowest since March 2000.

“We’re seeing some follow-through from last week, as there’s talk of further rains in Central and South America that could hurt some of the infrastructure” and delay shipments, Drew Geraghty, a broker at ICAP Futures LLC in Jersey City, New Jersey, said in a telephone interview.

Arabica-coffee futures for December delivery rose 2.4 percent to $2.508 a pound at 2 p.m. on ICE Futures U.S. in New York. Earlier, the price reached $2.515, the highest for a most- active contract since Sept. 21. On Oct. 21, the commodity jumped 5.7 percent, the most since January 2009.

Raw sugar futures for March delivery gained 2.3 percent to 27.1 cents a pound on ICE in New York, the biggest increase in a week.

Cocoa futures for December delivery climbed 2.4 percent to $2,627 a metric ton on ICE, a second straight gain. The price has fallen 13 percent this year.

In London futures trading, robusta coffee, refined sugar and cocoa rose on NYSE Liffe.

--With assistance from Moming Zhou in New York. Editors: Bill Banker, Dan Stets

To contact the reporters on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net; Yi Tian in New York at ytian8@bloomberg.net; Joe Richter in New York at jrichter1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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