Copper rose for a fourth day in New York and London, reaching a 28-month high as auto sales climbed in China, the world’s largest consumer of the metal.

Chinese passenger-car sales gained at the fastest pace in six months in October as government incentives for fuel- efficient models boosted buying in the biggest auto market. Figures due tomorrow may show the nation’s trade surplus increased in October, according to economists surveyed by Bloomberg News.

“Strong Chinese passenger-car sales numbers appear to have helped the base-metal complex overnight,” said David Thurtell, an analyst at Citigroup Inc. in London. “Tonight’s Chinese trade data is the next major signpost.”

Copper for delivery in December added 6.7 cents, or 1.7 percent, to $4.0235 a pound at 8:42 a.m. on the Comex in New York. Prices reached $4.0435, the highest level since July 3, 2008. Copper for delivery in three months climbed 2 percent to $8,834 a metric ton on the London Metal Exchange, and tin advanced to a record.

“Prices hit a new 28-month high today as global currencies declined and the prospect of continued demand in China, coupled with increasing demand in the U.S. on the back of the new round of stimulus, pushed prices up,” analysts at Fairfax IS said in a report.

Weaker Dollar

The Federal Reserve last week said it would purchase an additional $600 billion of Treasuries through June to bolster the U.S. economy. Copper also gained as the U.S. Dollar Index, a six-currency gauge of the greenback’s strength, erased a climb and slid as much as 0.4 percent, making metals priced in the currency cheaper in terms of other monies.

“The dollar has now reversed, and that too is helping the red metal higher,” Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe Ltd. in London, said in a report.

Wholesale deliveries of cars, sport-utility vehicles and multipurpose vehicles in China increased 27 percent from a year earlier to 1.2 million last month, the China Association of Automobile Manufacturers said today. Even a small car contains about 15 kilograms (33 pounds) of copper, according to the Copper Development Association’s website.

Premium Rises

Immediate-delivery copper traded at the highest premium to the three-month contract since July 2009, a sign investors and traders may be more concerned about near-term supply. Cash metal’s premium expanded to $10, the highest level since July 16, 2009, from $5 in the prior session.

“It’s already a tight market,” Mark Pervan, senior commodity strategist at ANZ Banking Group Ltd. in Melbourne, said today by phone. “Now you’ve got concern about supply. We’re going to move into a deep deficit next year.”

Production will lag behind demand by about 200,000 to 300,000 tons in 2011, compared with the current oversupply, Pervan said.

Copper stockpiles monitored by exchanges in London, New York and Shanghai have shrunk 22 percent this year, accounting for about 11 days of global demand, based on Royal Bank of Scotland Group Plc’s estimate for usage this year of 18.2 million tons. That’s down from about 14 days in January.

Smaller Inventories

“To the extent that the market is likely to remain tight, we could expect the cash-3s to stay in a backwardation for most of 2011,” Citigroup’s Thurtell said, referring to the spread between immediate-delivery and three-month copper.

Prices also gained today as LME inventories of copper shrank for a third day to 364,875 tons and orders to draw copper from stocks, or canceled warrants, jumped 14 percent to 31,750 tons. The figures were “bullish,” Thurtell said.

Tin for three-month delivery on the LME rose 2.8 percent to $27,349 a ton after reaching $27,500. The metal has jumped 61 percent this year, leading advances on the exchange, after production was disrupted in Indonesia and the Democratic Republic of Congo.

Aluminum rose 1.1 percent to $2,457 a ton and nickel climbed 0.9 percent to $24,350 a ton. Lead gained 3 percent to $2,579.75 a ton and zinc added 2.5 percent to $2,540.50 a ton.

To contact the reporter on this story: Maria Kolesnikova in Moscow at [email protected]

To contact the editor responsible for this story: Claudia Carpenter at [email protected].

Source: http://www.bloomberg.com/news/2010-11-09/copper-rises-for-fourth-day-reaches-28-month-high-on-chinese-car-sales.html