LONDON: Copper prices rallied to a more than two-week high on Wednesday after banks snapped up more than 500 billion euros in cheap funding from the European Central Bank, helping risky assets push higher.
Three-month copper on the London Metal Exchange was $8,638 a tonne at 1318 GMT, up 0.4 percent from a close of $8,600 a tonne on Tuesday. A session peak at $8,695.25 was its highest level since Feb. 10.
It traded flat at $8,590 in official rings.
Banks took 530 billion euros at the European Central Bank's second offering of three-year funds, slightly above forecasts, fuelling hopes that more credit will flow to businesses and government borrowing costs will ease further.
"This was the key event for the day and the result was within expectations helping support base metals and equity markets have also pushed higher," said Andrey Kryuchenkov, analyst at VTB.
"There is potential we will see more liquidity boosts in Europe."
The funding operation helped European shares push higher, while German bunds fell. The euro, however, dipped to a session low against the dollar in volatile trade.
A strong dollar makes dollar-priced commodities cheaper for holders of other currencies.
CHINA DEMAND WORRIES
The metal used in power and construction has risen almost 14 percent so far this year, and is on course for a second month of gains in February after hitting a five-month top of $8,765 early in the month.
But analysts say demand from top consumer China needs to bounce back to justify the metal moving higher.
Soft physical premiums for copper in Shanghai reflect continued weakness in Chinese demand, with a Shanghai-based trader saying premiums for cash copper have slipped to between $40-$70 per tonne over London prices from around $80-$90 earlier this month.
Copper stocks in warehouses monitored by the LME fell by a further 2,425 tonnes to 296,425 tonnes - a fresh 2-1/2 year low. The ratio of cancelled warrants, material earmarked for delivery, to total stock stood at 31.69 percent, mostly in US locations.
In contrast, stockpiles of copper at warehouses monitored by the Shanghai Futures Exchange remained near 10-year highs despite a drop last week for the first time since early December.
China is the world's biggest consumer of metals, accounting for around 40 percent of refined copper demand last year. Demand from the country has been slow to pick up since its Lunar New Year holidays in late January, but some bright spots in macroeconomic indicators may help support copper prices.
"The recent improvement in Chinese manufacturing activity coupled with the selective monetary easing stance of the People's Bank of China(PBoC) may help to spark Chinese buying again and provide the needed catalyst for copper to stage the next leg higher," Credit Suisse said in a note.
In industry news, a stoppage at Freeport McMoRan Copper & Gold Inc.'s Grasberg mine in Indonesia could be resolved within days, with talks between workers and management progressing well, a union official said on Wednesday.
In other metals, lead traded at $2,261 a tonne in official rings from Tuesday's close of $2,255 a tonne and tin was at $24,295 from $24,055. Nickel was at $20,050 from $19,755.
Aluminium was untraded in rings, but bid at $2,341 from $2,325. Zinc was also untraded, but bid at $2,140 from $2,123.
Comments
Comments are closed for this article.