Copper prices touched record highs above $3,340 a tonne on Thursday as fund managers shifted back into metals markets dominated by tight supply. Analysts said supply worries and shortages of material on the London Metal Exchange (LME), the world's largest non-ferrous metals market, cemented gains.
"Having set up new highs a period of consolidation would not be surprising," Basemetals.com's William Adams said.
"There's a chance to go higher above $3,350 after a brief period of consolidation, profit-taking and producer selling.
"However, from mid-July onwards there will be seasonal shutdowns for maintenance and with production increases due later this year we should see prices then ease."
Numis Securities analyst John Meyer said in a report: "Cash copper prices are perilously close to a staggering $3,550 a tonne as (economic) data out of China supports our view of continuing strong manufacturing growth in the region.
"The market is awaiting the release of Shanghai (metals) inventory data on Friday to measure the impact of recent strong industrial activity."
A trader said: "Copper is onwards and upwards - the market has been running short and they (shorts) have been caught on the wrong foot."
LME three-months prices closed at $3,317 after touching $3,343 at midday, but were still well up from Thursday's close of $3,287.
"Stops were triggered above $3,330/40 in copper and after this some profit-taking has weighed in, partly prompted by a reversal higher in the dollar," one LME broker said.
The dollar bounced higher in volatile, technically driven trade, recovering from an earlier dip on slightly soft US data as questions about political integration in Europe took a toll on the euro. In New York, COMEX July copper futures rallied to a new 16-year high on renewed fund buying.
The premium commanded by prompt delivery copper over three months delivery was at an 8-1/2-year high of $240 in London, with LME warehouse stocks of the metal falling 1,000 tonnes to 38,300 tonnes - a level last seen in July 1974.
Total world stocks, held by producers, consumers, merchants and all market warehouses, are some 670,000 tonnes, equivalent to less than three weeks of demand.
At the start of 2004 world copper inventories were 1.5 million tonnes.
The LME spot premium echoed that scarcity of nearby supply. Typically the cash price is at a discount to reflect the cost of storing and financing metal for forward delivery.
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