Copper hit a three-month high on Friday, underpinned by signs supplies were getting tighter as London Metal Exchange inventories dwindled. The move up in copper fuelled the complex higher with lead jumping 5 percent to a two-month high on technical buying and short-covering, traders said, while zinc also rose more than 5 percent.
In copper, a steady decline in LME warehouse stocks, exacerbated by weather-related infrastructure problems in China and reports of lower output at Chile's Codelco for 2007, kept prices firm.
"The single driving force behind copper's recent advance has been the steep drop in LME stocks," analyst Edward Meir of MF Global said. LME copper for delivery in three months ended the day up $150 at $7,700 per tonne, taking its gain for the week to almost 6 percent.
"I expect it to go through $8,000 in the near future," an LME trader said. In earlier trade copper hit an intraday high of $7,788 - its highest since October 31. Traders said the rise was mainly because of consecutive falls in LME inventories and on Friday a 2,725-tonnes drop took the total to 166,750.
Some market players believe the upward move may be unsustainable if stocks stop falling, given a weak macroeconomic outlook. "Although declining stocks are the main driver behind this latest move higher, we wonder what the market will do when the string of declines comes to an end," Meir said.
Citing an internal report, Chile's El Mercurio newspaper said on Thursday that Codelco, the world's largest copper miner, likely saw output fall by nearly 100,000 tonnes in 2007. Copper has been mostly in decline since hitting a high point of $8,315 a tonne in October on worries about falling demand in the United States and a global economic slowdown. It forecast an LME cash copper price average of $7,150 a tonne in 2008, up from last year's average of $7,126.
"In 2008, we expect both consumption and production growth to be stronger than last year," Natixis said. Aluminium gained $14 to $2,695 a tonne after rising 1.5 percent in the previous session.
Zinc ended the day at $2,450 per tonne, up from $2,350, after earlier trading up to $2,505, while lead closed at $2,970, up from $2,780. It touched $3,000 in earlier trade. Tin was untraded but quoted at $17,175/17,200 from 16,850 and nickel was quoted at $28,200/28,300 from $27,250.
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