New York, London Copper rose to its highest level in three weeks Friday, as a sharply weaker U.S. dollar, falling inventories and generally upbeat global economic data drove momentum and positioned prices for another challenge of their yearly highs, analysts said.
“It's the data and this weaker dollar,” said Matthew Zeman, head of trading with LaSalle Futures Group in Chicago. “The data coming out has been better than expected, not only here, but in Japan as well, so things look like they may be on the mend,” he said, referring to a greater-than-expected 5.2 per cent jump in Japan's industrial output in April.
“We also have inventories down again, so when you combine those three factors it's a good recipe for higher prices, which is what we are seeing,” he added.
Copper for July delivery on the New York Mercantile Exchange's Comex division climbed 6.05 cents (U.S.), or 2.8 per cent, to settle at $2.1975 a pound.
LaSalle Futures Group's Mr. Zeman expects the upside momentum to continue in the week ahead, with prices likely to butt heads with previous resistance levels near $2.25.
“We'll start running into some headwinds around $2.25, but this will be the third crack at this level this year and usually triple-tops do not hold, so I'd expect this market to put up a little bit of a fight there, but then break out and move higher.”
Copper for three-months delivery on the London Metal Exchange closed at $4,830 a tonne against $4,755 Thursday, and is up nearly 8 per cent in the month of May.
Industrial metals' gains were held in check with U.S. share prices after data showing a slump in Midwest business activity contrasted with separate figures showing the world's biggest economy contracted slightly less than estimated in the first quarter.
Analysts said while base metals prices have recovered this year, there are still concerns over actual demand versus perceived demand, as metals have latched onto stock market gyrations more than the ramifications of the auto sector crisis.
“[Metals sentiment] is more bullish, but we have to have a change in physical demand to keep prices at current levels,” said Abe Ulusal, a futures broker at Mitsui Bussan Commodities.
“Western European and North American markets are still very weak, and this week Chinese demand slowed down so my feeling is physical demand is still not there but the sentiment has changed,” he added.
LME warehousing data was supportive, with inventories of copper at LME warehouses falling 4,850 tonnes to 312,275 tonnes.
Buying from China this year has eaten into LME copper stocks and helped copper prices more than double in value in the year to date, but analysts say demand is starting to subside as the world's biggest consumer eases off a restocking drive.
Cancelled warrants – material earmarked for delivery – stood at 38,825, from 43,650.
Aluminum closed at $1,440 per tonne against $1,412 Thursday. Aluminum stocks continued to rise, up by 5,125 tonnes to a record above 4.2 million tonnes. The metal used in transport and packaging has been hammered as economic turmoil has hit the autos sector.
Battery material lead ended at $1,555 from $1,478, having touched a day's high of $1,560, up over 5 per cent and its highest level since April l7.
“The lead market is gradually getting tighter and tighter ... mine cut backs implemented in March are still flying through the market,” said David Thurtell, an analyst at Citigroup.
Tin finished at $14,200 from $13,650. Lead and tin supply worries remain as latest data shows a dominant position controlling 50 per cent to 80 per cent in the former and between 40 per cent and 50 per cent in the latter for cash warrants on LME stocks.
Zinc closed at $1,555 from $1,475, having touched a day's high of $1,545.50, nearly 5 per cent up on the day.
Steel making ingredient nickel ended trade at $13,950 from $13,500.