MELBOURNE: London copper hit its highest in nearly three weeks on Monday on stronger-than-expected demand from China but was still set to close flat for the month, while aluminium tracked coal prices to push towards a stronger finish for a second month in a row.
China's near-term copper outlook is looking brighter, said CBA commodity strategist Vivek Dhar in Melbourne.
"House prices for me was key. We saw house prices really rocket. If you see state grid investment it's up as well," he said, referring to recent Chinese economic data.
Still, new (housing) starts and some other leading construction indicators fell sharply in September and that suggests house prices may moderate going forward.
"If this is the start of weaker construction volumes, copper prices will likely come under pressure," he noted.
Copper demand typically lags housing prices by several months. China's new home prices rose in September at the fastest rate on record as buyers rushed to close contracts before new restrictive measures took effect in October.
But reflecting a smaller pipeline of new business, new starts fell 19.4 percent in September, the first year-on-year decline since December.
Construction accounts for around 15 percent of China's copper demand, and power just under half. China is the world's biggest consumer of the metal.
There continue to be signs that Beijing is stepping into cool its overheated housing market which may drag on copper demand further out.
Three-month copper on the London Metal Exchange touched $4,852.50 a tonne, its highest since Oct. 11, after closing up 1.1 percent on Friday. By 0700 GMT, it was trading down 0.4 percent at $4,823.00 a tonne.
Shanghai Futures Exchange copper rose 0.68 percent, or 260 yuan to 38,390 yuan ($5,671)
Shanghai aluminium hit the highest in more than two years, and was last up 2.2 percent at 14,100 yuan ($2,083), helped by soaring prices of raw feed material coal. This helped drag up prices for LME aluminium, which was on track for a 2.7 percent monthly gain. LME aluminium touched a 15-month top of $1,721.50 a tonne on Monday.
China's government has asked the nation's top coal miners to cap prices in their 2017 supply contracts at or below current spot market levels, sources said, a highly unusual move that reflects growing panic about runaway prices.
Coal prices have shot up in their steepest climb on record, more than doubling since June.
Reflecting pressure on aluminium supply, LME aluminium futures curves showed cash was trading almost at parity against the benchmark for the first time since June, boosting carrying costs and also the incentive to deliver metal to the exchange.
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