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http://www.miningweekly.com/article/china-data-supply-fears-sweep-copper-to-record-high-2010-11-11

China data, supply fears sweep copper to record high
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By: Reuters
11th November 2010
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LONDON - Copper raced to a record high on Thursday, with sentiment stoked by strong economic data from top consumer China and persistent supply fears as inventories fell.

Three-month copper on the London Metal Exchange hit a record $8 966 a tonne, compared with $8 760 at the close on Wednesday. The metal used in power and construction later gave up some gains to trade at $8 869 at 1529 GMT.

Other metals were also firm with battery material lead at its highest since January at $2 650 a tonne.

Aluminium hit a two year high at $2 500 per tonne.

Econonic data from China -- the biggest global consumer of copper -- including industrial production figures gave the market extra impetus to rise.

Also aiding sentiment in recent weeks has been the trend of falling London Metal Exchange inventories. Latest data showed copper stocks slipped 1 000 tonnes to 362 950 tonnes.

They are now down by a third from 6-1/2 year highs above 555 000 tonnes in mid-February.

"(The record high) underlines the tight market situation in copper and it's even more remarkable considering euro/dollar is trading a bit lower," said Arne Lohmann Rasmussen, chief analyst at Danske Bank.

Data showed China's industrial production grew 13,1 percent in October from a year before. Production of refined copper dropped slightly in October due to the week-long National Day holidays and repairs at a large smelter.

Retail sales increased by 18,6 percent, while headline consumer inflation hit a 25-month high of 4.4 percent in October and new yuan loans also beat market expectations.

"The China data underwrite a picture of a strong metal demand environment," Barclays Capital said in a note.

CHILE

Copper has now rallied more than 40 percent off lows hit in June, and is about 20 percent higher in the year to date.

"The question now is whether this is sustainable. If copper can close the week at such record levels then definitely that is likely," one European trader said.

The dollar was up 0,54 percent against a basket of currencies. A stronger dollar makes commodities more expensive for holders of other currencies.

Concern on supply has been a major factor behind the surge in copper prices due to a combination of falling ore grades in major producing nations, labour problems and project delays.

China's top copper producer Jiangxi Copper said domestic consumption of the metal is seen growing above 9 percent in 2011 and warned of a global shortage as early as next year.

Further support came as a strike by union workers at Chile's Collahuasi mine, moved into a seventh day. Output losses are likely at the world's No. 3 copper mine, industry experts said.

"We'll probably even see even higher prices over the next couple of months," said Daniel Briesemann, analyst at Frankfurt-based Commerzbank about copper. "There is an ongoing strong investment demand, seen in the imminent launch of base metals ETPs," he added, referring to exchange traded products.

Talk that physically backed ETPs in industrial metals are imminent has dominated base metals markets in recent months, generating speculation about their effect on prices and demand.

Several firms have put forward plans for base metal ETPs, with copper proving a popular choice.

The market is also watching large holdings of LME stock warrants and cash contracts on primary aluminium, copper, nickel, lead and tin.

Lead traded at $2 619,75 versus Wednesday's close of $2 604 a tonne. Aluminium traded at $2 482 a tonne in rings versus $2 448.

Zinc was at $2 546 a tonne versus $2 522. Tin was at $27 000 a tonne versus $26 950 while nickel was traded at $24 302 a tonne from $24 155.



Edited by: Reuters