LME copper above $3,000 tonnes on supply tightness

London Metal Exchange (LME) copper closed above $3,000 a tonne by Friday's kerb, its highest in a month, as supply tightness encouraged fund buying and short covering against a backdrop of dollar weakness, traders said. "Copper held above $3,000 all day which is very encouraging. The strength of the euro is also a very bullish factor," one LME trader said. Copper rose to $3,017 a tonne from Thursday's kerb close of $2,988.
Analysts said a squeeze on the Shanghai Futures Exchange (SHFE) had driven that market higher, which had rippled through to the LME.
China's Strategic Reserve Bureau was believed to have a long position of 36,115 tonnes of copper for December delivery on the SHFE where warehouse stocks totalled only 24,233 tonnes.
SRB could be in a position to ease tightness in the market in the short term by lending its long positions in copper to the market rather than take delivery.
"There was no Chinese selling today. They seem to be content to hold on for higher prices, " the LME trader said.
The cash to three months spread was $110/120 backwardation as LME stocks fell to 68,625 tonnes, the lowest since mid-1990.
"A backwardation at $115 probably won't attract much metal in, but it's on the edge of levels that will," Bloomsbury Minerals Economics analyst Peter Hollands told Reuters.
"As LME stocks dip below 80,000 tonnes you get a very volatile cash price and cash to three months backwardation," he said.
The dollar dropped against the euro and yen as the market shrugged off positive US economic data and stayed focused on the record US current account deficit.
The dollar has lost as much as six percent against the euro since early October as markets fretted the United States would fail to attract enough investment to plug its huge current account gap.
The euro was around $1.2961/69 at 1700 GMT easing from Wednesday's record high of $1.3005.
Aluminium was at $1,813.50, up $27.50, while nickel was at $14,700, up $700.
Zinc was at $1,116, up $27, while lead was at $954, up $14. Tin was $20 higher around $9,150.