Copper bounces five percent

Copper bounced almost 5 percent on Tuesday as inventories fell but analysts said the demand outlook remained grim as the world's major economies grapple with financial meltdown. Copper for three months delivery on the London Metal Exchange closed at $3,539 from Monday's close of $3,385 when it posted a 1.8 percent fall.
Copper inventories at LME warehouses fell 5,800 tonnes, adding to several sessions of stock declines. The 55,025 tonnes of copper earmarked for delivery, mostly from warehouses in Asia, also signalled a possible pick-up in demand. "We've now had a pretty sharp fall in recent days in copper stocks and more importantly there was a very sharp rise in cancelled warrants," said Stephen Briggs, a commodities strategist at RBS Global Banking & Markets, referring to copper earmarked for delivery.
"Warrants have been cancelled across a number of regions which we believe is due to metal being sold into China to take advantage of the price arbitrage," Barclays Capital said in a note. With many miners cutting production to help support falling metal prices, Australian statisticians surprised many with a forecast for a 10 percent rise in copper output in 2009-2010.
The country, which produces around 5 percent of the world's copper, will mine 1.016 million tonnes of copper in the year to June 2010, even after factoring in a more prolonged economic slump that has already triggered production cuts. Giving additional credibility to the output forecast, low availability of scrap is reducing production of refined copper in China, which could drive up demand for imports of the metal, smelter officials and analysts said.
Also, South Korea has issued a tender to buy 6,000 tonnes of primary aluminium ingot and 5,000 tonnes of copper cathode, the state-run Public Procurement Service said. Aluminium for three-month delivery ended at $1,315 a tonne versus $1,320, while stocks of aluminium at LME warehouses rose 17,200 tonnes to a record above 3.2 million tonnes.
Key stainless steel ingredient nickel rose to a high of $9,900 but was last bid at $9,650 in LME rings from $9,500. Zinc rose to $1,134 from $1,101 a tonne. Battery material lead, which gained more than 5 percent at $1,080 before closing at $1,075 from $1,028 a tonne. Tin closed at $10,850 a tonne versus $10,675.