By Claudia Carpenter and Dale Crofts (Bloomberg)

Copper prices rose for a second consecutive day on speculation demand is increasing fast enough to erode global inventory, led by emerging economies such as China.

Stockpiles monitored by the London Metal Exchange dropped 0.3 percent to 114,050 metric tons today, the lowest since Aug. 16. Even with increased production next year, global inventories at the end of 2007 will be half the supply of 2002, Mitsui & Co. said in a report today.

'There are some expectations of strong Chinese demand,' said Ron Goodis, retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey.

Copper for delivery in December gained 8.85 cents, or 2.7 percent, to $3.385 a pound on the Comex division of the New York Mercantile Exchange. Prices gained 3 percent yesterday. The metal, used in wiring and plumbing, dropped 2.1 percent this week, snapping a two-week rally.

On the London Metal Exchange, copper for delivery in three months rose $161, or 2.2 percent, to $7,460 a metric ton. Prices dropped 1.1 percent this week.

A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

China will have a large current-account surplus in the second half after the measure increased by more than a third in the first half, the nation's foreign exchange regulator said today. That may suggest the government's attempts to rein in the booming economy aren't succeeding, and strong demand for commodities will continue.

U.S. Housing Slowdown

Prices may drop next week on speculation that a slowdown in U.S. housing demand will curb consumption. The U.S. is the world's second-largest user of the metal.

'I definitely think copper is becoming more sensitive to the economy,' Equidex's Goodis said. 'Today's job data was pretty lean and we are still expecting copper prices to go down.'

The U.S. economy created 51,000 jobs last month, the Labor department said in Washington, fewer than economists predicted.

Six of 12 analysts, investors and traders surveyed by Bloomberg yesterday forecast copper will decline next week. Four expected a gain and two predicted little change.

U.S. Federal Reserve Chairman Ben S. Bernanke said Oct. 4 the housing market is in a 'substantial correction' that will lop about a percentage point off economic growth in the second half and restrain expansion next year. An average family house contains 400 pounds of copper.

'Copper is inextricably tied to the housing market,' said Michael Pento, a senior market strategist at Delta Global Advisors Inc., in Huntington Beach, California. 'The housing market will languish at best over the next three or four years, and we are looking for a global slowdown' that will affect copper, he said.

Nickel gained $600, or 2.1 percent, to $29,500 a ton in London. On Aug. 22, prices reached $29,950, the highest since 1987.

Nickel, used as an alloy in stainless steel production, has more than doubled this year as production of stainless steel expanded.

Nickel Consumption

Consumption will jump 10 percent this year to 1.37 million metric tons, the Lisbon-based International Nickel Study Group said today. It will rise to 1.45 million tons next year.

The report indicates stainless-steel makers haven't been deterred by rising prices. Production of stainless steel may jump 14 percent this year, the International Stainless Steel Forum said on Oct. 4.

Refined-nickel production will rise to 1.35 million tons this year from 1.29 million tons, the group said. That will increase to 1.45 million tons next year.