Copper prices climbed on Tuesday on a strong start to the corporate earnings season and expectations of improving 2011 demand, but lingering concerns over European debt tempered the rise. Benchmark copper on the London Metal Exchange closed at $9,510 a tonne from $9,321 on Monday. The metal used in power and construction hit a record high of $9,754 one week ago.
"Generally a good performance, (there is) good buying coming in," Credit Agricole analyst Robin Bhar said. "But volatility is continuing to be a feature...There are concerns about the eurozone...so that is capping the upside. I think any dips are there to be bought with an eye on the rest of 2011."
Copper is widely expected to build on its nearly uninterrupted rally in the second half of 2010 as ore grades decline, new mines remain scarce and top buyer China grows. Alcoa Inc, the largest US aluminium producer, reported a fourth-quarter profit on Monday and projected a 12 percent rise in demand for the metal in 2011, driven by aerospace and auto manufacturing.
"Alcoa came out pretty positive on the demand outlook for aluminium...with China holding well, improving data from the US and no disasters in Europe so far, (that) paints a picture of reasonable demand growth this year," RBS analyst Daniel Major said. Copper extended gains in later trade as the euro wiped out earlier losses to rise modestly against the dollar, with traders citing talk of increased Portuguese bond buying by the European Central Bank as helping lift the currency.
A second hefty delivery of aluminium was warranted in LME-bonded warehouses, taking total stocks up by some 125,000 tonnes or 2.8 percent in two days to 4.39 million tonnes. "It seems it's that time when the liquidation of some of the financing packages are coming about," said one London trader.
A vast proportion of aluminium has been locked away in warehouses under cheap rent and financing deals, which enable metal holders to profit if prices rise faster than storage and insurance costs. The premium for three-month material against that for cash delivery stands at some $17 - around half the level seen a year ago. Aluminium closed at $2,497 a tonne, from a $2,488 close.
Lead closed at $2,595 a tonne, from the $2,586 close. A 1,300 tonne build in inventories took total stockpiles to 211,675 tonnes, the highest level in more than 15 years. Zinc closed at $2,406 a tonne, against $2,379 while stainless steel material nickel was untraded but bid at $24,695, up from $23,875, having lodged gains of some 3 percent.
"Worth considering is the potential impact on nickel from the floods in Australia as 50 percent of Chinese nickel pig iron producers use coking coal, which has seen a large rally in prices recently," said Citibank in a note. Tin closed at $26,550 a tonne, versus a bid of $26,250 on Monday.