Copper rose on Monday as riskier assets were buoyed by policy easing in China, the top consumer of most metals, and as the euro rose on expectations that the euro zone's policymakers would approve Greece's long-awaited second bailout.
Euro zone finance ministers are expected to approve a second bailout for Greece on Monday to try to draw a line under months of uncertainty that has shaken the currency bloc, although work remains to be done to make the numbers add up.
The euro rose versus the dollar on expectations that the policymakers would approve the bailout. A weaker dollar can lift dollar-denominated commodities by making them more affordable for consumers using other currencies.
Benchmark three-month copper on the London Metal Exchange closed at $8,235.5 per tonne, after touching a session high of $8,396.5. It closed at $8,175 on Friday. Copper fell almost 4 percent last week, its biggest weekly loss in nine weeks. "There is an element of fatigue about this situation in Europe, perhaps reflecting the fact that there's much less risk of a systemic banking crisis associated with a possible Greek default," said Credit Suisse analyst Tom Kendall.
China's announcement to cut the amount of cash that banks must hold is expected to boost lending capacity by more than $50 billion and may help to spark domestic metals demand. But traders said China's easing steps may still take some time to filter down to metals product makers, with one major domestic trader saying he expected only an ancillary impact on his business as such steps do not translate directly into better access to loans.
Credit has been a major factor constraining commodities demand growth in China, which accounted for around 40 percent of global refined copper demand last year. Copper stocks in warehouses monitored by the Shanghai Futures Exchange are at their highest in nearly a decade, data showed on Friday, as traders routed metal to the world's top copper consumer on hopes demand would pick up after the Lunar New Year in January.
"The physical market is still not responding, and it may take more time to consume domestic stockpiles, since stocks built on the ShFE on Friday," one Shanghai-based trader said. LME copper stocks in London continued to fall, with the latest data showing a drop of 500 tonnes to 305,875, their lowest point since early September 2009. But with Shanghai stocks rising, the would-be bullish signal from the data has been called into question.
LME cash copper is trading at a discount of just $6 a tonne versus the three-month contract, compared with a discount of $26 earlier this month, possibly indicating that near-term supply is getting tighter. "On average global (copper) supply has fallen short of plan by more than 6 percent since 2005. Copper was the only major base metal that avoided testing the cost curve in the second half of 2011. The key to copper's elevated price versus cost lies with struggling mine supply," said Macquarie analysts in a note.
Lead closed at $2,051 from $2,056 at the close on Friday, with LME stocks down 1,975 tonnes at 377,825 tonnes - not far off their highest level of 388,500, hit in October last year. Tin closed at $23,525 from $23,475, zinc at $1,982 from $1,945, aluminium $2,179 from $2,164. Nickel, untraded at the close, was bid at $19,750 from $19,650.