LONDON: Copper extended gains on Monday as investors saw value in a metal that fell to four-month lows last week, even as they remained concerned about the risk of contagion if Greece defaults on its debt and leaves the euro.
Leaders of G8 major industrialised nations meeting at the weekend vowed to take steps to combat financial turmoil and revitalise a global economy threatened by Europe's debt crisis, but they offered no specific prescription for debt-crippled Greece which is to hold elections on June 17.
Recent opinion polls show Greek voters are returning to the establishment parties that negotiated its bailout, offering potential salvation for European leaders.
But deepening banking sector instability in Spain heightened concerns about contagion from Greece's political turmoil, meaning investors will likely stay risk-averse at least until the Greek election.
Three-month copper on the London Metal Exchange was traded up more than 1 percent at $7,745.50 a tonne in official midday rings from $7,650 on Friday.
"Compared to the pessimism that was going around last week there has been some recovery, but the next significant move (in copper) is going to be in a downward direction," said Capital Economics commodities economist Ross Strachan.
"We're going to see weak (Chinese) copper imports over the coming months because end use demand remains weak and stockpiles have increased dramatically. That combined with weakness in manufacturing demand in Europe is obviously weighing on metals."
Offering copper some relief, however, China's premier Wen Jiabao called for additional efforts to support growth on Sunday, after a recent series of economic indicators suggested the world's second-biggest economy will slow further in the second quarter.
"Copper prices increased for a second day on the Chinese premier's comments that the government should give more priority to maintaining growth," Fairfax said in a note.
China is the world's largest copper consumer, accounting for around 40 percent of global copper demand, but monetary stimulus in the Asian giant can at best put a floor under copper, given worsening fundamentals.
Metals warehouses in China are said to be so full that workers are starting to stockpile iron ore in granaries and copper in car parks.
The latest LME data showed copper stocks rose 3,200 tonnes to 224,375, with net inflows into mostly South Korea, where traders suspect Chinese merchants have booked around 110,000 tonnes for delivery.
SLASHED
In the United States, money managers monitored by the Commodity Futures Trading Commission (CFTC) slashed their net long or "buy" positions in copper in the week of May 15 by the largest amount since the start of April.
The exodus reflects weakening confidence in commodities markets and mounting concerns about the euro-zone debt crisis that knocked the euro to four-month lows against the dollar on Friday.
In other metals traded, tin was last bid down at $19,400 a tonne from $19,645, while zinc, used in galvanizing, was last bid up at $1,903 a tonne from $1,895.
Lead traded largely flat at $1,956 a tonne from $1,966, aluminium traded down at $2,045 from $2,068, while stainless-steel ingredient nickel traded up at $16,855 from $16,825.
In industry news, Rio Tinto Alcan has written to Japanese buyers asking them to pay a record premium of $200 per tonne for July-September primary aluminium shipments, two sources directly involved in the talks said on Monday.
Also, Indian non-ferrous metals producer Hindalco Industries plans to start its 1.5 million tonnes per annum (mtpa) alumina refinery in the eastern state of Orissa by January 2013, a senior company executive said on Saturday.
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