TOKYP, (Bloomberg) – Copper traded near a three-month high in Asia on concern rising demand and production cuts in China may erode stockpiles. Nickel also extended gains.

Copper inventories monitored by the London Metal Exchange dropped fell 1.5 percent to 169,475 metric tons on Thursday, the fifth straight decline and the lowest since Nov. 7. About 25 percent of the supply is scheduled for withdrawal in coming weeks, the exchange said in a report. Stockpiles have dropped 14 percent this year.
“Expectations that metal markets would return to surplus in 2008 now appear to be shaky,” Gerard Burg, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said in an e-mail on Friday. “Consumers appear to be stocking up now to ensure adequate supplies.”
Copper for delivery in three months on the London exchange gained 0.5 percent to $7,580 a metric ton at 11:33 a.m. Tokyo time. Prices jumped 2.9 percent on Thursday after reaching $7,630, the highest since Nov. 1, earlier in the session.
Copper has gained 14 percent this year, extending a six-year rally that has buoyed profit at mining companies including BHP Billiton Ltd., the world’s largest. The metal is used to produce wires and pipes.
“Electricity shortages in China are becoming a key issue to metals markets,” Burg said. “Metal smelters in the country have been taken offline with no certainty as to when they will resume production.”
----------------------------------------Chinese Production
Jiangxi Copper Co., China’s second-largest producer, said Feb. 4 output at its smelter dropped to 60 percent to 70 percent of normal production after bad weather hampered power supplies. The company produced 554,000 tons last year, according to Beijing Antaike Information Development Co.
China produced 3.457 million tons of refined copper in 2007, up 16 percent from a year earlier, data compiled by London-based metals consulting company CRU showed.
The output fell short of consumption in China, the world’s largest copper user, by 1.16 million tons, CRU data showed.
China’s copper consumption will probably rise 11 percent in the first quarter from a year earlier to 1.28 million tons, supporting prices as U.S. demand weakens, CRU said.
Stockpiles of the metal in South Korea, the nearest LME warehouse location to China, have fallen 36 percent this year. Inventories in the U.S., the second-largest user, have dropped 7.3 percent, following last year’s 18 percent slump.