Copper rises four percent

Copper rose almost 4 percent on Wednesday as investors bet a rate cut in China, the world's top consumer of the industrial metal, could help boost growth and demand. However, metals trimmed some of their gains as the dollar rose against the euro later in the day on renewed risk aversion and European shares fell along with Wall Street, dragged down by weak US data that fanned recession fears.
"The dollar has strengthened quite a lot, that's taking a little bit off the prices," analyst Michael Widmer at BNP Paribas said. Copper for three-months delivery on the London Metal Exchange rose as high as $3,840.50 an ounce, before easing to $3,755 per tonne at the close, still up $60 from Tuesday.
"China is such a massive consumer of metals, much more so than the United States and Europe," Citi analyst David Thurtell said. "If the US or Europe cuts rates it's positive but not nearly so significant as these Chinese cuts for base metals." Industrial metals were also boosted by short covering as investors who had bet on lower prices bought back their positions.
Output cuts by some producers in response to lower metal prices may also be starting to make an impact. Copper inventories in LME warehouses fell 875 tonnes to 286,350 tonnes, the first decrease since October 20. Some other metals were boosted by continuous supply cuts. The world's biggest zinc producer Nyrstar SA, said it will cut output by 25,000 tonnes this year and 130,000 tonnes in the first half of 2009 as a result of falling zinc prices.
The metal, used to galvanise steel, jumped 5.1 percent to a high of $1,310, before ending the day at $1,260 per tonne from $1,246 at the close on Tuesday. Prices have dropped more than 40 percent this year.
Australian miner Straits Resources Ltd will scale back next year's production target at its Tritton copper mine in Australia to 2,200 tonnes a month. An official of PT International Nickel Indonesia Tbk, one of the world's top nickel producers, said the firm may cut output 20 percent next year. Nickel was at $10,600 from $10,500.
Hydro Aluminium, the German unit of Norwegian group Norsk Hydro, is considering production cuts, while Montenegro's sole aluminium plant KAP will cut its output by half in response to falling metal prices and high energy costs. Aluminium closed at $1,800 a tonne from $1,810, lead was at $1,186 from $1,190, while tin slightly rose to $12,950 compared with $12,900/12,925.