Copper hits $8,000, data lifts demand outlook

By Michael Taylor

LONDON (BestGrowthStock) – Copper hit a 20-month high above $8,000 a tonne on Tuesday, as robust U.S. jobs, service sector and housing data buoyed demand hopes.

By 1039 GMT (6:39 a.m. ET), copper for three month delivery on the London Metal Exchange traded at $7,960 a tonne from $7,885 at the close on Thursday.

Copper, used in power and construction, earlier hit $8,009.75 after resuming trade following the four-day Easter holiday weekend — its highest level since August 2008.

“It was the good economic data in the United States,” said Eugen Weinberg, an analyst at Commerzbank. “Unemployment data last week, the ISM data yesterday and also pending home sales were better than expected.

“The data we’ve been recently seeing, continues to point to a continuous strong, robust recovery,” he added. “The market is getting more and more optimistic.”

Nonfarm payrolls rose 162,000, the U.S. Labor Department said on Friday, the largest number of jobs added in three years.

Separate reports showing pending sales contracts for existing homes rose unexpectedly in February and further expansion in the U.S. services sector added to the market’s upbeat sentiment. The United States is the world’s largest economy.

But Weinberg added that recent copper price rises had been mostly driven by positive demand expectations rather than the fundamentals, which increases the risk to the downside.

The red metal rose 5.5 percent in the first quarter, after climbing 140 percent in 2009, as a combination of improving macro data, a weaker dollar, and fund and Chinese buying supported prices.

Further monetary tightening from China, the world’s largest metals consumer, persists however to cap gains.

Last week, data showed that China’s vast manufacturing sector picked up speed in March, and could spur further policy tightening.

On Tuesday’s economic calendar, the U.S. Federal Reserve is due to release its latest policy meeting minutes at 1800 GMT, which may offer further clues on monetary and fiscal policies.

Also boosting industrial metals prices in recent weeks, have been falls in LME warehouse stocks, coupled with rises in canceled warrants — material earmarked for delivery.

On Tuesday however, copper canceled warrants were at 16,125 tonnes compared with 29,800 tonnes on March 1, suggesting that the economic and demand recovery may be slow and protracted.

“You used to be able to think that a big pick-up in canceled warrants was metal being moved for consumption,” said David Wilson, director of metals research at Societe Generale. “But it’s never a clear picture these days — with more speculative elements moving metal from one side of the line to the other.

“(But) prices have been quite impressive … it’s on the back of the stronger than expected payroll data,” he added. “Our view on copper is that this year’s demand recovery was already priced in last year, so less upside.”

Aluminum traded at $2,365.50 versus a final bid at $2,351 on Thursday, after earlier hitting a three-month high at $2,375.

Among other base metals, steel making ingredient nickel traded at $24,964 from $25,050 while battery material lead was at levels not seen in three weeks at $2,247.75 from $2,190.

Speculators have been active in the nickel market in recent weeks, with LME last week’s data showing a dominant position controlling between 50-80 percent of cash warrants.

The discount between the cash and three-month contract, at $39 a tonne, is more than half $83 on March 1.

Zinc traded at $2,421 a tonne from $2,404 and tin was at $18,500 from $18,450.

Stock Market Today

(Additional reporting by Nick Trevethan in Singapore)

(Reporting by Michael Taylor; editing by Keiron Henderson)

Copper hits $8,000, data lifts demand outlook