NEW YORK/LONDON: Copper surged to a two-week high above $7,500 per tonne on Wednesday, as budding signs of increased Chinese purchases underpinned sentiment and drove prices further away from last week's 14-month low.
After leading the broader commodity complex down in late September to cap its biggest quarterly loss in three years, copper has since outperformed its peers with a near 14-percent rally as European debt contagion fears subsided a bit and Asian demand signals perked up.
"The key driver has come from China," said Nicholas Snowdon, analyst with Barclays Capital in New York.
"We are beginning to see signs of a pick-up in Chinese buying post the Golden week holiday. The first couple of days this week was pretty quiet, but now buying today from the Chinese in noticeably higher."
London Metal Exchange (LME) benchmark copper rallied $239 or nearly 3.3 percent to finish at $7,529 a tonne, its priciest level on a closing basis since late September.
In New York, the key December COMEX contract shot up by 10.30 cents or 3.1 percent to settle at $3.3935 per lb, closer to the top of its $3.2385 to $3.4115 session range.
But volumes continue to indicate that the move may lack conviction. A little more than 46,000 lots traded in New York, down 17 percent from the 30-day norm, according to preliminary Thomson Reuters data.
Copper continued to take its directional cues from Asian equities, particularly the Shanghai Composite, which ended up 3 percent in its biggest single-day gain in about a year.
A technical rally in the euro versus the dollar provided an additional layer of bullishness to the dollar-denominated metals.
But with such a heavy dependence on China, which accounts for about 40 percent of global demand, copper has reacted more to signs of Chinese restocking.
LME copper stocks in South Korea and Singapore, locations nearest to China, have been declining sharply since the end of September.
Latest data showed copper stocks in LME-registered warehouses fell by 1,525 tonnes, with canceled warrants -- metal earmarked for delivery -- at 10 percent of total stocks.
"We're seeing bonded warehouse stocks for copper at low levels now, and with the arb opening and China's economy still growing, you have to expect some hand-to-mouth restocking," said Robin Bhar, analyst at Credit Agricole.
Barcap's Snowdon agreed, adding that any greater clarity or resolution to the European debt crisis would keep China hungry for metal.
"The Chinese have been extremely concerned about Europe in terms of the market and where prices could head. Any positive developments there sort of galvanizes the confidence of Chinese consumers."
"They don't want to miss out on an opportunity to get copper at $7,000 to $7,500."
In industry news, Freeport Indonesia has ramped up copper concentrate production at its strike-hit giant Grasberg mine, to more than 4,000 tonnes per day in October, while almost 79,000 tonnes would be shipped this week.
ALUMINUM SHORT-SELLING
Alcoa Inc, the largest US aluminum producer, said an economic slowdown hurt demand and knocked prices for the metal lower, denting its third-quarter profit.
In a call with analysts, Alcoa Chief Executive Klaus Kleinfeld blamed the price drop on, "very offensive short-selling going on by speculators.
"They are betting against aluminum as a proxy for betting against the global economy," the CEO said.
Aluminum prices fell by almost 20 percent in the third quarter on global economic concerns and Alcoa's share price fell 41 percent during the same period.
LME aluminium futures were untraded in rings, but bid at $2,239 a tonne from Tuesday's close at $2,230.
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