Copper moves up

Copper rose on Thursday as the dollar fell and after better-than-expected US jobless data, but concerns that high oil prices driven by violence in Libya could slow economic growth kept prices under pressure. Three-month copper on the London Metal Exchange closed at $9,505 a tonne, up from $9,425 at Wednesday's close.
New applications for US unemployment benefits fell last week, but orders for a range of manufactured goods recorded their biggest fall in two years in January. "The jobless data is certainly improving. The story out of the US is likely to be one of the main positives for base metals this year," said Natixis analyst Nic Brown.
But he added: "Rising oil prices are fuelling inflation and in order to tame inflation emerging countries will have to tighten their monetary policy and sacrifice some GDP growth, which will hurt base metals demand." Copper remains well off a record high $10,190 it hit on February 15. Oil surged more than 7.5 percent to its highest since August 2008 on concern the unrest in Libya could spread to other major oil producers in the Middle East, including Saudi Arabia. [O/R]
"There are concerns about what is going to happen in Libya and what is going to happen to oil prices," said Standard Bank analyst Leon Westgate. "Higher oil prices are generally fairly negative on growth and there is a risk of contagion," he said. Slower growth would have a negative impact on demand for industrial metals.
The surge in oil prices and the unrest in the Middle East and Africa stung the US currency. A weaker dollar supports metals prices as it makes dollar-priced commodities more affordable for foreign investors. Ample supplies of copper kept a lid on prices, analysts said. "The physical copper supply is very good; scrap is around in abundance and the discounts are quite high," said Herwig Schmidt, head of sales at Triland Metals. "Inventories have also been rising in the last two months and the market has finally taken notice."
While the short-term outlook has weakened, long-term fundamentals for copper remained good, with a supply shortage expected in 2011, Westgate said. China's imports of refined copper are likely to have fallen in February because the lunar New Year holidays cut arrivals, after a 7.4 percent rise in January supported by fabricator restocking. Copper inventories in LME warehouses continue to rise, hitting 412,675 tonnes, the highest level since last July, latest data showed. The abundance of material available in the short term pushed the copper market in a $3.5 per tonne contango - the discount for cash against three-month material.
Aluminium closed at $2,542 a tonne from $2,530 at the close on Wednesday. Analysts believe the outlook for the metal used in transport and packaging remained positive. "We expect aluminium prices to remain well supported by strong demand from China and Europe," said Kamil Wlazly, a metals analyst at Metal Bulletin Research.
"The fact that the light metal has been left behind for the past year in the base metals rally could make aluminium a first choice for hedge funds to rebalance their portfolios by moving away from copper." Tin was $31,600 from $31,500, while zinc, used in galvanising, closed at $2,473 a tonne from $2,495.
Battery material lead was $2,500 from $2,539 and nickel was $27,505 from $28,700 a tonne. "Zinc, lead and nickel are the metals with the worst fundamentals and are getting sold more aggressively during this risk-aversion period," RBS analyst Daniel Major said. Strong nickel supply growth in the next two years is expected to offset growing demand from the stainless steel industry, he added.