[miningmx.com] — LME copper hit a record high on Wednesday, playing catch up with US prices on prospects of recovering 2011 demand, while a rate rise in top consumer China at the weekend failed to quell the metal’s record run.
Three-month copper on the London Metal Exchange finished at $9 400 a tonne, up from $9 360 a tonne on the LMESelect close on Friday. Markets in London were closed on Monday and Tuesday for Christmas bank holidays.
The metal used in power and construction earlier hit a new all-time high of $9 447 a tonne, spurring momentum in other metals such as battery material lead and galvanising metal zinc which rallied near four percent at one point.
“The rate rises don’t seem to have made much of a difference to copper’s upward trend. Of course the market looks overdue for a correction but we may have to wait until next year for that,” said analyst Ed Meir of MF Global.
Meir sees $10 000 as copper’s next target.
Copper has rallied with renewed vigour this month, with demand widely expected to outstrip supply next year.
The global market was already in a 436 000-tonne deficit for the first nine months of 2010, an industry group said last week.
Analysts also said that LME prices were chasing US prices where some contracts hit new records on Tuesday.
COMEX copper was steady to slightly lower at 431.65.65 cents per lb, just a hair off the record high of 433.50 cents hit on Tuesday and a tad above equivalent prices on the LME.
So far, China’s rate rise has not put the brakes on runaway copper prices, although it may moderate demand going forward, said Commerzbank analyst Daniel Briesemann.
“It should withdraw some liquidity for the markets and maybe affect consumption … but to affect the copper prices, China has to implement more pronounced measures to cool inflation,” he said.
China’s central bank has raised interest rates on loans that it makes to commercial banks, a move that dovetails with benchmark interest rate increases and is likely to have a limited impact on financial conditions.
Also assisting was the dollar which had softened following a weak Treasury auction, making the purchase of dollar-priced assets cheaper for holders of other currencies.
Declining supply
Copper supply remains constrained as ore grades decline, with few significant new operations on the horizon.
Copper output in the world’s top producer dipped 0.3 percent in November from a year earlier to 467 478 tonnes, a statistics body said Wednesday. Looking ahead, however, signs have emerged that record prices have encouraged investors to reappraise opportunities.
The high price will bring further hefty investment into the sector in Zambia next year, keeping it on track to produce an annual 1 million tonnes by 2012, the head of the body representing foreign miners said.
In inventories, copper stocks rose by a small 225 tonnes, having grown by over 6 percent since mid-month.
At 370 950 tonnes, total stockpiles are at two-month highs, but still down by one third since they hit a cycle high of 555 075 tonnes in February.
Across other metals, lead, zinc and aluminium all rallied to their highest since November.
Lead closed at six-week highs of $2 531 a tonne in, up from $2 437.50. Zinc ended at $2 398 from $2 299 a tonne amid good volumes of over 7 500 lots of three-months. A trader said that short-covering was fuelling lead as well as zinc, where trade may also be taking advantage of high prices to sell.
Aluminium finished at $2 455 a tonne from $2 430. It earlier reached $2 480 a tonne, closing in on 2010 highs of $2 500.
Western world unwrought aluminium inventories fell to 1.249 million tonnes in November from 1.334 million in October, the latest data showed.
