Copper rises

Copper rose on Tuesday on prospects for improved demand in Asia, recovering from losses earlier in the day after China announced an interest rate hike. Copper for three-months delivery on the London Metal Exchange (LME) closed at $9,390 a tonne from a close of $9,330 on Monday.
China's central bank raised interest rates for the fourth time since October in a bid to cool stubborn price pressures. Analysts said the moved had been expected. "Most participants are of the opinion that the drop within a few minutes of the announcement was exaggerated," said Commerzbank analyst Daniel Briesemann. "The interest rate hike should not come as a surprise, because I don't think there was anyone who was not expecting an interest rate hike," he added.
Indeed, a government researcher said in remarks published on Friday that China's central bank might have to raise interest rates and reserve requirements in April. Helping to lift sentiment, China's state-owned Chinalco said growing global copper consumption and strong fundamentals were expected to support the price this year, although the market would be volatile.
Comments from the CRU conference in Chile, the world's biggest copper industry gathering, also improved the mood. The head of Anglo American's copper business, John MacKenzie, said copper stocks held by Chinese investors were unlikely to flood the market any time soon. There are concerns that rising stocks held by investors as collateral in China, not immediately visible to the market, could significantly reduce an expected copper deficit that has catapulted prices to record highs this year.
The latest data shows stocks of copper in LME warehouses rose 4,425 tonnes to 442,325 tonnes, their highest since early July 2010. On Monday 6,000 tonnes of stock entered in South Korea, extending a recent rise in LME copper stocks in Asia. Chinese markets were closed on Tuesday for Tomb-Sweeping Day.
Worries about demand remain. "Copper's on the weak side, not helped by that increase in stocks in Korea overnight," said Stephen Briggs, an analyst at BNP Paribas. "It's likely to be Chinese material, and that's a pattern that we've seen this year." The metal used in power and construction has shed more than 8 percent since hitting a record high of $10,190 a tonne on February 15 as the price strength has deterred Chinese purchases.
Keeping a lid on gains, oil prices rose to 2-1/2 year highs as unrest in oil-exporting countries in the Middle East and Africa outweighed China's interest rate hike. Aluminium closed at $2,641 a tonne from Monday's final bid of $2,632 a tonne. Zinc was at $2,425 from Monday's close of $2,417 a tonne and battery material lead was at $2,790 from $2,752 a tonne.
Tin was $31,605 a tonne from $31,625 and nickel was at $25,405 a tonne from $25,500. "We remain cautious about the short-term outlook," MF Global said in a note about base metals. "In particular, the spectre of rising interest rates practically the world over, has us the most concerned, as it will most likely dent growth prospects going into the second half of the year."