Copper rose but held below record highs on Friday, underpinned by expectations of restocking next year by top consumer China, paring gains as the looming Christmas break kept trading volumes in check. At 1440 GMT, copper on the London Metal Exchange traded at $9,340 a tonne, from the $9,300 close on Thursday.
The metal used in power and construction has climbed 27 percent this year, and earlier on Friday flirted with recent record highs of $9,392 before paring gains. Prices are widely seen hitting five figures early in 2011. "For copper, the combination driving factors are going to continue to be strong Chinese demand, such as restocking, but also production failing to keep up with that demand, so the market moving into significant deficit next year," said Standard Bank analyst Leon Westgate.
Standard Bank sees the roughly 20 million tonne copper market in a 385,000-tonne deficit for 2011, widening to a 562,000-tonne deficit the following year. "Although I am bullish in 2011. I allow myself to become super-bullish for 2012 purely because that stock level isn't there," he added. An accident at a key export port in Chile has renewed the spectre of disruptions to concentrate supply.
Chile is the world's top copper producer. "Copper probably won't hit records today but it's certainly not far away - we have seen a very strong bounce from yesterday," said one. Christmas holidays have drained volumes, with three-month copper flow around one sixth of usual levels. US markets are shut on Friday, while the LME is operating at reduced hours. Floor trade finished at 1400 GMT, while via LMESelect will wind up at 1600. The LME will reopen on Wednesday December 28.
Commodity index compilers recalculate the weightings for the individual commodities in their indexes once a year, to reflect changes in the wider commodity markets they follow, and focus is now shifting to the January re-balancing. But at 370,725 tonnes, total stockpiles remain still down by one third from cycle highs of 555,075 tonnes seen in February.
In the physical market, a dominant position controlling 50-80 percent of stock warrants on the LME rose to between 80-90 percent. Other metals mirrored coppers' subdued range. Aluminium changed hands at $2,423 a tonne, down from Thursday's $2,432 close. "Chinese refined aluminium production has fallen further in November due to Beijing's policy driven energy constraints," Macquarie said in a note.
Stainless steel material nickel traded at $23,906, versus $23,600, while battery sector lead traded at $2,429.90 from $2,449 and zinc, used in galvanising traded at $2,302 versus $2,298. Tin, the other metal pegged at a top performer for 2011, amid tight supply from top exporter Indonesia, was traded at $26,800 from $26,875, but still within $1,000 of record highs of $27,500.