LONDON: Copper rose on Friday, spurred by expectation China could ease monetary policy further and boost demand for industrial metals after inflation slowed to a 20-month low, while a successful bond swap in Greece added to improving sentiment in markets.
Benchmark copper on the London Metal Exchange (LME)rose to $8,392 a tonne at 1017 GMT, up 0.7 percent from a close of $8,330 on Thursday.
In China, annual consumer inflation slowed sharply to a 20-month low at 3.2 percent in February, and factory output and retail sales also cooled more than forecast, giving policymakers ample room to further loosen monetary policy to support flagging growth.
China is the world's top consumer for copper, accounting for as much as 40 percent of total demand.
Further monetary easing steps in China, which cut its bank's reserve requirement ratios (RRR) in November and February, could help boost demand for industrial metals, analysts said.
"After the inflation rate dropped to 3.2 percent there is more room for monetary easing. Although we do not expect another rate cut, we expect further reduction in the reserve requirement ratio," said Daniel Briesemann, analyst at Commerzbank.
"Given China's current five-year plan in which growth is still one of the highest priorities, there is definitely a need for base metals. I am convinced we will see a pickup in demand later in the year."
China's copper output continued to grow last month, with refined copper production in February rising 9.5 percent from a year earlier to 437,000 tonnes.
But imports data to be released on Saturday is likely to show a drop in copper imports last month with the arbitrage window between the LME and Shanghai shut since early January.
Also helping lift investor sentiment, Greece averted the immediate risk of an uncontrolled default by winning strong acceptance from its private creditors for a bond swap deal which will ease its massive public debt and clear the way for a new international bailout.
"Industrial metals mostly gained, as rumours of a possible RRR cut in China and more optimism regarding Greece... benefited prices," ANZ analysts said in a note.
Focus in later in the session will be on US non-farm payrolls at 1330 GMT, which is likely to provide further evidence that the pace of recovery in the country's key labour market is gaining traction.
The economy probably created 210,000 jobs last month, according to a Reuters survey, following January's tally of 243,000. The unemployment rate is expected to have held at a three-year low of 8.3 percent.
SHANGHAI COPPER STOCKS
Tamer inflation should point to further cuts in China's bank reserve requirement ratios, said Vishnu Varathan, market economist at Mizuho Corporate Bank, and help lift domestic demand for copper.
"The upshot is that policymakers need not be overly concerned about overheating risks as demand-pull pressures are not a real threat. Policymakers will be more focused on cushioning the slowdown amid political sensitivities."
Low premiums on Chinese copper and near-decade high stockpiles of the metal in Shanghai warehouses suggest oversupply in China with demand slower than expected.
Copper stockpiles in Shanghai warehouses rose another 3,294 tonnes to 224,781 tonnes, data from the ShFE showed on Friday, the highest level since July 2002.
Premiums on copper from Shanghai bonded warehouses are now at $30-$60 per tonne over LME cash copper, said a Shanghai-based physical dealer.
In contrast, copper stocks in warehouses monitored by the LME dropped by 4,000 tonnes to their lowest level in more than 31 months at 276,025 tonnes, data from the LME showed on Friday.
Aluminium rose to $2,216 from Thursday's close of $2,206 a tonne. Zinc climbed to $2,052 from a close of $2,049 while lead edged up to $2,125 from $2,124 a tonne. Nickel rose to $18,900 from $18,800.
Tin was at $22,650. It was untraded at the close on Thursday, but was bid at $22,750.
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