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Source: Reuters

METALS-Copper rises on Chinese data; dollar caps gains

Published: 13 Dec 2009 17:33:08 PST

* Rise in China's copper imports seen boosting metals

* Copper inventories head toward 500,000 tonnes

* U.S. data beats forecasts, stokes optimism

LONDON, Dec 11 - Copper prices rose on Friday as robust data from top metals consumer China pointed to better demand prospects, but gains were clipped after strong U.S. data boosted the dollar.

Aluminium prices meanwhile surged more than 3 percent to their highest since mid-October last year.

Benchmark copper for three-month delivery on the London Metal Exchange rose to $6,850 a tonne at 1609 GMT up from $6,809 at the close on Thursday.

Boosting sentiment was Chinese industrial output data, which surged in November at its fastest pace since June 2007, underlining the economy's brisk recovery from the global downturn.

Also, China's imports of unwrought copper and semi-finished copper products rose 10.3 percent in November from the previous month, defying market expectations for a flat performance to a slight decline.

"The (China) data is certainly supportive, but we're off the highs because U.S. data came out better than expected so we're seeing dollar strength," said Randy North, trader at RBC Capital Markets.

While a stronger dollar makes metals and other commodities priced in the U.S. currency less attractive for non-U.S. investors, North said the data ultimately pointed to economic recovery in the U.S., which should boost copper prices.

"I still expect $6,800 to hold as a support level for copper."

The dollar rose after U.S. data showed sales at retailers in November and consumer sentiment in December both improved more than foreacst.

Equity markets, seen by some as a proxy for economic growth, rose in Europe and the U.S. following the data, helping copper hold onto gains clocked up earlier on upbeat Chinese numbers.

Copper, used in power and construction, hit 14-month highs last week and has more than doubled this year, due to a combination of a weak dollar, Chinese buying, new investor cash and improving macro data.

But the metal hit a two-week low at $6,762.75 on Thursday and is headed for its biggest weekly drop in percentage change terns since September.

Demand worries and investor concerns about the effects sovereign debt could have on the global economic recovery, have weighed on prices in recent sessions.

FUNDAMENTALS IGNORED Many investors have ignored soft fundamentals, including rising inventory levels. LME copper stocks, which rose 4,450 tonnes to 466,075 tonnes, are up about 80 percent from early July.

Analysts say if the rise in inventories continues, price corrections or pullbacks can be expected in the short-term, although they remain upbeat on longer term prospects as recovery gathers pace, especially in China.

"We expect a quiet start to 2010, especially with the late timing of the Chinese new year (mid-February). Overall however, the subtle shift in Chinese activity suggests that participants are starting to gear themselves up for the recovery," said Standard Bank in a note.

"Short-term wobbles aside, copper prices appear to be on track for a strong showing in 2010."

In other metals, aluminium was at $2,277 from $2,203. The metal earlier rose to $2,284, its highest in nearly 14 months.

LME stocks for the metal, used in transport and packaging, eased 3,875 tonnes but remain near record levels above 4.5 million tonnes. The bulk of the inventories are tied up in financing deals however, say analysts.

Also, traders say premiums are rising in various regions as the material is tied up in financing deals, creating short-term tightness.

Stainless steel making ingredient nickel traded at $15,200 a tonne from $16,275 while battery material lead was at $2,307 from $2,275.

Zinc traded at $2,308 a tonne versus $2,270 and tin bucked the trend, falling to $15,200 from $15,300.

Metal Prices at 1615 GMT Metal Last Change Percent Move End 2008 Ytd Percent

move COMEX Cu 310.00 2.05 +0.67 139.50 122.22 LME Alum 2280.00 77.00 +3.50 1535.00 48.53 LME Cu 6850.00 41.00 +0.60 3060.00 123.86 LME Lead 2315.00 40.00 +1.76 999.00 131.73 LME Nickel 16500.00 225.00 +1.38 11700.00 41.03 LME Tin 15250.00 -50.00 -0.33 10700.00 42.52 LME Zinc 2308.00 38.00 +1.67 1208.00 91.06 SHFE Alu 16145.00 85.00 +0.53 11540.00 39.90 SHFE Cu* 54280.00 160.00 +0.30 23840.00 127.68 SHFE Zin 18225.00 250.00 +1.39 10120.00 80.09 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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