Copper rises, China import data helps

LONDON: Copper rose on Wednesday, after rallying more than 3 percent the previous day, propelled by strong import data from top consumer China and an improving economic outlook for the United States.

A firm dollar restrained gains slightly but dollar-denominated commodities are showing signs of unshackling from a negative correlation with the US unit, with recent data suggesting that recovery in the world's largest economy is gaining steam.

Three-month London Metal Exchange (LME) benchmark copper rose 0.6 percent to $7,790 per tonne by 1058 GMT, from $7,745 at the close on Tuesday.

"People were a little bit surprised yesterday by the strength of the Chinese imports, particularly in copper," Natixis analyst Nic Brown said. "Our overall view on China demand for copper this year is that it's going to be good."

But he cautioned against reading too much into the numbers, which showed inbound shipments of copper rose 12.6 percent to a record in December from the previous month as arbitrage and financing opportunities sucked more metal into the country.

"There were ample import arbitrage opportunities in the October/November period. And in December they largely went away. This is reflective of a number of factors," Brown said.

"You've still got concerns over Chinese growth prospects, you've got tight monetary conditions going into year end, plus you also have a very early Chinese New Year this year."

China's offices and exchanges will be shut in the last week of January for the Lunar New Year holidays, traditionally a weak period for copper consumption.

NORSK PLANS PRODUCTION CUTS

Chinese imports of aluminium also rose last month, and this has helped underpin aluminium prices, as has news of production cuts.

Norway's Norsk Hydro became the latest aluminium producer to cut production due to economic uncertainty and high costs, announcing plans to curtail output at a plant in Australia.

Last week, Alcoa Inc, the largest US producer of aluminium, was the first to announce a cutback in response to steep aluminium price falls, slashing annual global smelting capacity by 12 percent.

This could signal cuts at China producers too.

"A substantial chunk of the industry (in China) is likely to be in negative territory given where prices are at the minute," Brown said.

"Plus you've got the emphasis on environmental policies, energy intensity policies, so we think there is pressure to constrain Chinese output of aluminium."

However, there are still plentiful inventories of alumininium in warehouses, keeping a lid on further rises in the price of the metal.

Three-month aluminium was 0.1 percent firmer at $2,167 per tonne from $2,164 at the close on Tuesday.

Credit Suisse said more evidence than the Chinese import data was needed before a bottom in base metals prices could be confirmed.

"For now, technical momentum remains largely negative across the sector," it said in a note. "However, the latest positive performance coupled with the improved sentiment mark a good start."

Tin was up 0.6 percent at $20,380 from $20,275, zinc was flat at $1,930, lead was up 1 percent at $2,010 from $1,989 and nickel was up 0.2 percent at $19,542 from $19,505.