Copper rallies

Copper rallied on Wednesday, helped by a weaker dollar and supply constraints while better-than-expected US jobs data boosted risk appetite, offsetting worries about the risk of a disorderly Greek default. Benchmark copper on the London Metal Exchange closed at $7,885, up more than 2 percent from $7,730 a tonne on Tuesday when it fell by more than three percent.
The metal rallied by a quarter last month from a 2011 trough of $6,635 to peak above $8,200 a tonne last week. Supporting copper was data showing a supply decline and a pick up in employment in the world's largest economy, the United States, which underscored the view the economy is on a path of slow growth.
"The underlying fundamentals for copper are good; supply data is weak and demand from China is still robust," said Standard Chartered analyst Daniel Smith. Stressing the supply tightness for the metal, Freeport-McMoRan Copper & Gold Inc said late on Tuesday production and processing rates at its strike-hit Grasberg mine in Indonesia had fallen below levels needed to meet fourth-quarter sales targets.
Supply from the world's top copper producer, Chile, was also declining, data showed on Friday. Positive fundamental news offset worries about the eurozone debt situation. "The rally overnight is just the market deciding that yesterday's story about Greece wasn't quite as bad as first feared because of the intricate politics this involves," said BNP Paribas analyst Stephen Briggs.
Underpinning copper was a rebound in the euro against the dollar, and options expiry for the LME's November copper contract. A weaker US currency makes dollar-based commodities cheaper for holders of other currencies. Capping gains though, a business survey showed the European downturn in eurozone manufacturing in October was deeper than previously reported, underlining how severely the currency union's debt crisis has choked new factory orders.
Demand for refined metal in top copper consumer China is expected to grow 6.4 percent in 2012, a slowdown from this year's 8.5 percent growth rate, a senior analyst at state-backed research firm Antaike said on Wednesday. Real consumption of refined copper may rise to 7.85 million tonnes in 2012 from 7.38 million tonnes expected in this year, Yang Changhua said.
China is the world's largest consumer of base metals, accounting for almost 40 percent of copper demand last year. "China's demand may be somewhat weaker in 2012 but it will sustain global demand for commodities," said Caroline Bain, commodities analyst with Economist Intelligence Unit (EIU). EIU expects China to begin relaxing monetary policy early next year
"China is believed to have run down stocks of base metals in 2011, which coupled with markedly lower global prices, could spark a rush of Chinese buying in early 2012," she said in a note. Also supporting copper prices was another draw from LME-registered stocks and ongoing strikes at Freeport-McMoRan Copper & Gold Inc operations in Indonesia and Peru.
Copper stocks have dropped around 10 percent in the last month. Across other metals, lead closed at $2,024 a tonne from $1,982 and aluminium at $2,127 from $2,111. Nickel ended at $18,580 from $18,700 while zinc, used in galvanising finished at $1,927 from $1,913 on Tuesday's close. Tin, untraded at the close, was last bid at $22,000 from a bid of $21,750 on Tuesday.