Copper rises

Copper rose on Wednesday as global markets were led higher on signs the worst of the credit crunch might be ending, analysts and traders said. Copper for three-months delivery on the London Metal Exchange, often seen as a key gauge of real economic activity, closed at $8,515 per tonne, up $215 from Tuesday.
In testimony to Congress, US Federal Reserve Chairman Ben Bernanke said the US economy could shrink in the first half of the year, but should then pick up as interest rate cuts stimulate growth. European stocks hit session highs in late trade, led by banks, as financial institutions drove US stocks into positive territory.
Copper has risen around 25 percent this year, outperforming share indexes, which have suffered as a result of the credit crunch and fears about a US recession. "Numerous bullish factors have driven prices to these levels, including heavy fund buying and some short covering on inflation fears, a weak dollar, portfolio diversification, falling LME stocks, Chinese demand, supply concerns and a tight concentrate market," analysts at Standard Bank said.
Earlier, copper traded down to $8,310 as markets wavered between optimism about strong demand from China and fears that a recession in the West could mean lower overall use of metals. "Metals are caught in between the poor outlook for the United States against the strong emerging markets," metals analyst Daniel Hynes at Merrill Lynch said.
At the start of the traditionally busy second quarter, demand is expected to recover, and with supply constraints around the world, prices could climb higher in the longer term, analysts say.
"We've got supply constraints across the market, in combination with strong demand from emerging markets which could still compensate for any downturn in the US or even in Europe," Hynes said. Inventories of copper in LME-registered warehouses stand at around 112,000 tonnes, having fallen almost 45 percent since early January and is only enough for around two days of global consumption.
"The stock levels are falling but the worries about the economy are still there," a trader on the floor of the LME said. If prices remain around these levels, it could be a sign metals will revisit historical highs, such as copper's $8,820 per tonne which it touched in March.
"Most metals have posted strong gains from the beginning of the year and this current bout of base building is encouraging, in our view, for further gains in some metals in the months ahead," analysts at Barclays Capital said in a report.
"We have argued for a long while that, despite the fog of economic uncertainty and US consumption weakness, broadly speaking base metals markets are incredibly tight and, by our calculations are on their way to becoming even tighter."
Aluminium was $24 lower at $2,950/2,960 per tonne, Lead firmed by $95 to $2,870 while zinc was up $40 at $2,350. Tin was up $50 at $20,100/20,105 and nickel was lower at $28,300 versus $29,300.