Copper rises

Copper rose towards record highs again on Monday as inflation expectations, robust Chinese demand and supply kinks ahead attracted fund inflows. Copper for three-months delivery on the London Metal Exchange finished at $9,201 from a close of $9,070 a tonne on Friday.
The metal used in power and construction earlier neared a record high of $9,267.50 a tonne hit last week. "Major factors are the supply demand situation and the desire for hard assets as investors are concerned about inflation," said analyst Robin Bhar of Credit Agricole. Investors remained confident Chinese demand would remain strong, despite recent concerns that potential further monetary tightening in the world's top base metals consumer could hit the country's demand.
News of supply troubles at a Chilean port underlined the metal's fragile supply side picture, adding background support to prices, added Bhar. "It is a supportive factor in an already tight market but I think it is unlikely that copper will see new highs on the back of this news," Bhar said.
"They are already looking for alternative ports. It should not have a major impact. During the holiday the smelters should not have a big capacity, anyway." Chile's Collahuasi mine, the world's No 3 copper deposit, is looking for alternatives to export copper concentrate after its main port was shut down following an accident, the company said.
It has declared force majeure on copper concentrate sales after an accident at a shiploader shut its key port terminal over the weekend. Traders also said that copper's move towards record levels earlier was part technical, with Shanghai copper's move to a 33-month high in Asia forcing shorts to cover.
Shorting occurs when traders sell a contract they do not own on expectations of falling prices, but they can be forced to buy these contracts back at a premium if prices rise instead. "Copper prices have disconnected a bit from the physical market, which didn't follow through from gains in Shanghai overnight," said one London metals trader. Shanghai copper hit its highest since March 2008 earlier.
Capping gains, there was some wariness in the market about debt problems in the euro zone. Indeed, the European Central Bank has expressed "serious concerns" that Ireland's bailout package could affect the institution's liquidity operations in the eurozone. Investors also kept an eye on tensions between the two Koreas.
In fundamentals, traders said that a premium for cash lead over the three-month contract did not accurately reflect the physical market where the battery material is in ample supply, but was adding to price support. The premium for cash lead climbed to the highest level since April 2009 against the three-month contract, helping to attract material into warehouses. Lead stocks last rose 150 tonnes to 207,750 tonnes, near 10.5-year peaks.
The UK's bitterly cold conditions boosted demand for energy on Monday. Cold snaps tend to damage batteries, boosting replacement demand. Lead finished at $2,440 a tonne, from $2,420. Aluminium ended at $2,378, from $2,335 a tonne on Friday and zinc was at $2,289 a tonne from $2,274. Tin closed at $26,190 a tonne from $26,050. Nickel was at $24,550 a tonne, nearing two-month highs, from $25,000.