METALS-Copper at 1-year high; data points to recovery

Published: 25 Oct 2009 17:21:17 PST

* Corporate earnings, upbeat data boost economic outlook

* Stock levels hint at weak demand outside China

* Multi-month highs in many industrial metals

* Dollar recovery caps gains

LONDON, Oct 23 - Copper climbed to a new one-year high on Friday as upbeat data in the U.S. and Europe renewed prospects for economic recovery and metals demand.

Zinc touched $2,297.50, its highest point since May 2008, having gained nearly 17 percent this month, more than any other LME traded metal. Zinc premiums are set to rise as mills that use the metal to galvanise steel restart production due to rising demand, industry sources said.

Benchmark zinc on the London Metal Exchange traded at $2,269 a tonne at 1445 GMT from $2,250 at the close on Thursday while copper rose to $6,629 from $6,585.

The red metal earlier touched $6,714 -- a level last seen on Sept 29, 2008 -- and is on course for its biggest weekly gain since July.

"There's been promising numbers from Europe and the U.S. today," said Arne Lohmann Rasmussen, analyst at Danske Bank.

"Recovery is spreading from Asia to Europe and also to the U.S. And then of course you have strikes in Chile ... and strong data out of China in the last couple of days."

U.S. data out earlier showed existing home sales hit a two-year high in September. The U.S. housing market is key to driving demand for copper, a metal used primarily in power and construction.

In Europe, data showed industrial new orders in the Eurozone rose more than expected on the month in August, underlining expectations for an economic recovery.

The data added to numbers from China on Thursday, which showed economic growth quickened to 8.9 percent in the third quarter. China is the world's leading copper consumer.

In industry news, a strike at Chile's Spence copper mine entered its 11th day, while the outage at the huge Olympic Dam mine in Australia continues.

CAPPING GAINS

But capping gains in metals, the dollar rose against a basket of currencies, making dollar priced metals more expensive for non-U.S. investors.

"While we continue to remain bearish on the dollar's longer- term prospects, we suspect that we are quite oversold in the short-term. We therefore would be wary about chasing this current bounce in metals," MF Global said in a note.

Analysts also warned about rising LME copper stocks, which suggest demand outside China remains weak. Latest data showed inventories rose 3,000 tonnes to total 367,075, their highest level since mid-May and a rise of about 40 percent since July.

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In other metals, aluminium, used in transport and packaging, was at $1,956 from $1,966 a tonne after earlier touching a two-month high at $2,000.

"We believe that energy prices would have to move closer to $90, and remain there, before aluminium would be able to sustain a move above $2,000," said Standard Bank in a note.

Aluminium is the most energy intensive of all the metals, and analysts believe if energy prices rise, even an over-supplied market like aluminium can clock up gains.

Stocks of aluminium fell 5,275 tonnes, according to latest LME data, but remained near record highs above 4.5 million tonnes.

Steel-making ingredient nickel was flat at $19,200 while battery material lead traded at $2,410 from $2,405.

Tin edged up to $15,100 from $15,000, having earlier hit $15,600, its highest since mid-June.

Metal Prices at 1447 GMT Metal Last Change Percent Move End 2008 Ytd Percent

move COMEX Cu 301.80 3.00 +1.00 139.50 116.34 LME Alum 1960.00 -6.00 -0.31 1535.00 27.69 LME Cu 6625.00 35.00 +0.53 3060.00 116.50 LME Lead 2400.00 -5.00 -0.21 999.00 140.24 LME Nickel 19150.00 -50.00 -0.26 11700.00 63.68 LME Tin 15100.00 100.00 +0.67 10700.00 41.12 LME Zinc 2265.00 15.00 +0.67 1208.00 87.50 SHFE Alu 15110.00 125.00 +0.83 11540.00 30.94 SHFE Cu* 51330.00 870.00 +1.72 23840.00 115.31 SHFE Zin 16780.00 335.00 +2.04 10120.00 65.81 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07