Copper springs back

Copper rose on Wednesday, boosted by positive economic data and expectations of stronger demand from top metals consumer China, with a weaker US dollar also supporting prices. Benchmark copper on the London Metal Exchange closed at $9,685 a tonne from $9,510 at the close on Tuesday. The metal used in power and construction hit a record high of $9,754 a tonne on January 4.
Nickel hit its highest level since May 2010 and tin reached a two-month high. Focus in the copper market has switched to the high probability of stronger demand from top consumer China and a deficit for a market estimated at around 19 million tonnes. "We had positive macro data flow supporting expectations of robust demand recovery further down the line," said Gayle Berry, an analyst at Barclays Capital. "This is a positive environment for industrial metals."
Stocks of copper in London Metal Exchange warehouses fell 1,475 tonnes to 378,175 tonnes. However since December 9, they had risen by about 30,000 tonnes prompting some to think demand could be waning. However, others note the more than 30 percent drop in copper stocks since they hit a 6-1/2 year high in mid-February.
"People are not really worried about the recent rise ... Global copper stocks are at historically low levels, that's what people are looking at," a LME floor trader said. Copper cancelled warrants at 34,350 tonnes are at their highest since July and account for more than 9 percent of total stocks. A 135,950-tonne rise in LME aluminium stocks since January has weighed on prices of the metal used extensively in transport and packaging.
"People think that material was held privately, for financing deals, which have matured," the trader said. But aluminium closed higher at $2,505 a tonne from $2,497 a tonne. Barclay's Berry also mentioned looming power cuts in China potentially curbing output and supporting prices.
Three-month zinc closed at $2,479 a tonne from $2,406, lead finished at $2,661 from $2,595 and tin ended at $27,000 from $26,550. Nickel closed at $25,800 from $24,695. Nickel prices could benefit from the flooding in Australia cutting coking coal production, RBC said. "With coal supplies getting squeezed, the Chinese will find it difficult to produce steel using nickel pig iron and will have to return to the higher grade steels that utilise refined nickel," the bank said in a note.