Copper climbs

Copper climbed on Friday after the dollar fell and concerns abated that monetary tightening in top consumer China could heavily hamper demand. Three-month copper on the London Metals Exchange, recovering after falling more than 2 percent the day before, closed at $9,441 a tonne at 1548 GMT, up from a close of $9,355 and some way off the record high $9,781 it hit on Wednesday.
Higher-than-expected gross domestic product growth and inflation in China mean the government may have to tighten its monetary policy more aggressively than previously thought. "People got a bit carried away yesterday...apart from the fact inflation is still above what we'd like - the recent data showed the Chinese story is looking very good," said Citi analyst David Thurtell.
"With the tightening to date you could expect Chinese growth will slow a little bit further in the coming months, perhaps to 9.5 (percent), but combined with data in the US that continues to pick up and strong numbers out of Germany, the outlook (for metals) is pretty good," he added. China's economic growth quickened in the fourth quarter, with gross domestic product at 9.8 percent, from 9.6 percent the quarter before, data showed on Thursday. China represents 40 percent of global metals demand, and worries that tightening measures aimed to cool its economy could hurt metal demand caused prices to tumble earlier this week.
The metal used in power and construction was also supported by a weaker US dollar. The euro rose to a two-month high versus the dollar on Friday, helped by Asian demand and improving confidence in the eurozone. Record prices in copper could cause demand destruction as industry switches to cheaper aluminium instead, said Standard Bank said in a research note.
"Longer term, sustained high copper prices will result in potentially some substitution...This should take the edge off copper prices," it said. Aluminium stocks jumped by 64,000 tonnes to 4,550,325 tonnes the most recent data showed, and are up by more than six percent so far this year alone. Lead stocks last fell 175 tonnes to 264,175 tonnes, after touching their highest level since May 1995 on Wednesday. The backwardation on lead - a premium for cash material over the three-month contract - rocketed to $80 a tonne, its highest since October 2007. This compared with a backwardation of $31 earlier this week. There was a contango on lead of $0.5 in late December - a discount for cash over three-month material.
But fundamentals for lead remain weak as excess supply dampens sentiment. Data on Friday continued to show a dominant position controlling 80 to 90 percent of the stock warrants and cash contracts on London Metal Exchange (LME) lead. Lead was at $2,4425 a tonne at the close, versus Thursday's close at $2,437.
Tin rose to touch a record of $27,750 on Friday as investors focused on supply deficit expectations and also helped by the dollar. The metal ended at $27,745 from $26,950. Stainless steel material nickel finished at $26,175 a tonne from $25,750, zinc at $2,318 a tonne from $2,330 and aluminium wound up at $2,420 from $2,408 a tonne.