Copper climbs

Copper hit its highest in two months on Thursday, supported by investors' greater appetite for risky assets after the safe passage of Greece's austerity plan, as well as positioning ahead of the end of the first half. Three-month copper on the London Metal Exchange closed at $9,430 - its highest since end-April - compared with a close of $9,320 a tonne on Wednesday.
Copper's gains came against a backdrop of optimism in other markets that Greece is on its way to averting a default, cutting the risk sovereign debt crisis could spread across the eurozone and derail the global economic recovery. The Greek parliament approved detailed austerity and privatisation bills on Thursday in a crucial vote to secure emergency funds and avert imminent bankruptcy, but longer-term dangers still lurk.
"There's a relief rally - it suggests there was some uncertainty prior to the vote that maybe the implementation part would cause problems and now that it didn't you've seen this relief rally come through," Danske Bank analyst Christin Tuxen said. The LME options market was also supportive of higher copper prices, noted Citi, with a large pool of open interest at the $9,500 strike. Prices tend to gravitate towards large areas of open interest. Options for the July contract expire next week.
Copper's chart picture has also improved, with the metal breaking above its 100-day moving average around $9,362, a key buy signal watched by funds. "Today is the last day of the month, the quarter, the half year," analyst Robin Bhar of Credit Agricole said. "... You could argue that it has been a very difficult quarter for a lot of funds. They may have lost money and it may be a last ditch effort to flatter their balance sheets."
Metals brokers and producers are shifting metal out of Goldman Sachs' Metro warehouses in a bid to break the unit's hold on stock movements, senior trading sources told Reuters last week. LME copper stocks fell for a sixth session, by 1,775 tonnes net, the latest data showed, and have now dropped around 12,000 tonnes from 13-month highs tipped earlier this month.
Copper demand is expected to undergo a soft patch over the next few months, but most analysts expect consumption to ramp up towards the end of the third quarter. Longer term, prospects remain set for higher prices against a backdrop of growing infrastructure and consumer goods demand not just from top consumer China, but also other fast-growing economies like Brazil, said Barclays Capital. "Consumption indications remain very supportive so far in 2011...in the initial stage of a strong infrastructure investment cycle," it said in a note.
Barcap sees domestic copper and aluminium demand rising 92 percent and 53 percent, respectively, over the next 10 years. Boosted by copper, other metals also advanced, with lead ending at $2,684 a tonne - a new high since mid-April - compared with a $2,634 close. Zinc, which also hit its highest since mid-April, ended at $2,365 from $2,317 a tonne. Nickel, which hit a one-month-high, closed at $23,425 a tonne, up from $23,075. Aluminium ended flat at $2,532 a tonne and tin closed at $26,050 from $25,845 a tonne.