Copper prices rose to their highest in more than a week as manufacturing data from China showed potential for strong demand, reinforcing worries about shortages due to supply disruptions.
Benchmark copper on the London Metal Exchange ended up 0.7 per cent at $US6016 a tonne from an earlier $US6090, its highest since February 21.
With global economic activity improving, copper demand is likely to expand towards 3.7 per cent this year from 3 per cent last year, according to UBS. Photo: Bloomberg
Factory activity in China expanded faster than expected in February as domestic and export demand picked up, adding to signs that the global economy is gaining momentum even as fears grow of a surge in trade protectionism.
"Chinese data is definitely a reason to be bullish on industrial metals," Commerzbank analyst Eugen Weinberg said.
"If the Fed goes for more rate hikes (than expected) this year, then it's due to underlying economic dynamics proving to be more positive than expected, which is a good thing."
The dollar hit its highest in seven weeks as comments from two influential Federal Reserve policymakers were interpreted to mean that US rates could rise at the March meeting.
However, supply disruptions in Indonesia and Chile are a positive for copper.
Freeport-McMoRan's inability to export copper concentrate since mid-January and a strike at BHP Billiton's Escondida mine in Chile - the world's largest - last month pushed copper to 21-month highs of $US6204 a tonne.
"Potential mine supply disruptions are not the only factors supporting higher prices. The demand backdrop for copper should strengthen this year as well," UBS analysts said in a note.
"We expect global economic growth to accelerate, driven by firmer industrial production. With global economic activity improving, copper demand is likely to expand towards 3.7 per cent this year from 3 per cent last year.
Three-month aluminium rose 1.3 per cent to $US1949 a tonne from an earlier $US1957, its highest since May 2015.
Aluminium's gains have been fuelled by China ordering aluminium producers in 28 cities to slash output during the winter months as Beijing intensifies its war on smog.
China accounts for nearly 60 per cent of the world's aluminium production estimated at more than 60 million tonnes this year.
Zinc gained 1.3 per cent to $US2862, lead rose 2.1 per cent to $US2305.5, tin was up 1.6 per cent to $US19,525 and nickel added 0.5 per cent to $US11,030.
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