Copper rose more than 3 percent in London on Tuesday as investors in commodities indexes bought the metal and buyers hoped strong Chinese demand would persist, analysts said.
Three-months futures on the London Metal Exchange, often considered a key gauge of real economic activity, were up more $235 at $7,135 per tonne by the end of the official open outcry session, after ending the previous session fractionally down on the day.
"The move is mostly driven by the rebalancing of commodity indexes," Commerzbank analyst Eugen Weinberg said. "Because industrial metals didn't perform well last year, they are performing well now." The re-balancing of indexes, commonly used investment tools, involves selling assets that have made big gains, and buying those that have underperformed.
Copper ended 2007 up 5 percent, in contrast to lead, which rose 53 percent. Lead has fallen slightly since the start of 2008, but was up $5 at $2,590 per tonne at the end of the official session.
Aside from re-balancing, the prospect of ongoing heavy use in China was supporting copper prices. "Market participants expect more buying to come from China," Weinberg said. The behaviour of the dollar against other currencies would also be key to metals price movement, analysts said.
"This week is very light on the data front and there shouldn't be too much selling coming into metals. We had a terrible number on Friday with the payrolls but the dollar should dominate direction this week in the absence of other data," he added. A weaker dollar gives holders of other currencies more purchasing power for metals, which are dollar-denominated. Copper hit a two-month high of $7,135 on Friday before weaker-than-expected US non-farm payrolls numbers knocked the wind out of the market.
Zinc was up $48 at $2,540 per tonne, and prices could by supported by a flood and cave-in at the San Vicente zinc mine run by Peru's San Ignacio de Morococha. Aluminium was up $21 at $2,491 per tonne, tin was up $150 at $16,400 per tonne, and nickel was up $950 at $29,150 per tonne.
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