Buying interest creeps back into base metals

Aluminum rose the most in two weeks in London before a report projected to show housing starts strengthened in the U.S., the world’s second-largest consumer of industrial metals.

Work began on 965,000 new houses at an annualized rate in July, compared with 893,000 in June, according to a survey of economists before data due at 1:30 p.m. London time. Building permits also increased, a separate survey showed. The fee to borrow aluminum for a day in London reached $9 a metric ton, the highest level since December 2012.

“With geopolitical pressure easing for now and with sentiment in equities remaining bullish, it does look as though some scaled-down investment buying interest is creeping back into the base metals,” William Adams, an analyst at Fastmarkets.com in London, said in a note today.

Aluminum for delivery in three months gained 0.9% to $2,038 a ton by 12:59 p.m. on the London Metal Exchange after climbing as much as 1.4%, the most since Aug. 4.

The construction industry accounts for 20% of world usage of the lightweight metal, according to United Co. Rusal, the largest producer. The MSCI All-Country World Index of equities advanced for a second day. The Red Cross said it’s making progress on details of a safe-passage plan for a Russian aid convoy intended for southeast Ukraine.

“There has been limited news of note on the geopolitical front, which has paved the path for a recovery in risk appetite,” RBC Capital Markets Ltd. said in a note today. “A stronger dollar, weak risk appetite and falling property prices in China are still capping metals prices.”

Aluminum for immediate delivery closed yesterday at a $1.25-a-ton discount to the three-month contract, the narrowest gap since Dec. 17, 2012. Stockpiles monitored by the LME are at the lowest since September 2012. Tomorrow is this month’s third Wednesday, when traders on the exchange notify counterparties whether they plan to take delivery to settle positions.

Copper for delivery in three months on the LME was little changed at $6,907 a ton and futures for delivery in December climbed 0.2% to $3.139 a pound on the Comex in New York. Nickel, zinc and lead gained in London as tin slipped.