Copper shot through $4,500 a tonne to 5-month highs on Thursday after inventories fell and warehouse metal tagged for delivery rose, but dire demand prospects were expected to cap prices. Benchmark copper on the London Metal Exchange hit $4,564 a tonne, the highest since October 30, and closed at $4,550 a tonne versus Wednesdays close at $4,400.
The metal used widely in power and construction is up about 45 percent since the start of the year. "Metal is being pulled from LME warehouses into China," said Citigroup analyst David Thurtell. "There are a few more green shoots (of recovery) coming out," he said of the market. Analysts say copper is heading for China, the worlds largest consumer because of the price premium in Shanghai over London Metal Exchange prices - about $1,200 a tonne.
Stocks of copper in LME warehouses fell 7,425 tonnes to 496,775 tonnes, the lowest in nearly three weeks. Cancelled warrants or those earmarked for delivery rose to 62,575 on Wednesday - more than 12 percent of total stocks - compared with 59,825 the previous day. Rallying equities also lifted sentiment. Many of the cancelled warrants are now in European warehouses such as Rotterdam in the Netherlands.
Falling freight rates from Europe to Asia are boosting the premium for material in China. The Baltic Exchanges main sea freight index which tracks rates to ship dry commodities has been falling. It has tumbled to 1,478 index points from 2,298 on March 10. Lower freight costs have also raised the premium, at a record $650 a tonne, for aluminium in Shanghai over LME prices.
Cancelled warrants on LME aluminium stocks at 93,500 tonnes are down a touch from the previous day, but they compare with 10,575 tonnes in the middle of January. Most are in Singapore, an indication they may be heading for China, the worlds top consumer and producer. However, LME stocks of the metal used in transport and packaging rose to a record above 3.55 million tonnes, a gain of more than 50 percent since January.
Until economic growth, consumer spending and car sales revive, aluminium is unlikely to make significant price gains. Aluminium closed at $1,536 a tonne from $1,492, having reached $1,538, its highest since January 12. Zinc hit $1,405 a tonne, its highest since mid-October, and closed at $1,393 from $1,370.
Lead was last quoted at $1,401/1,403 a tonne from $1,335, having hit $1,414, its highest since early November. Analysts say the battery material has been helped by low stocks which, at around 60,000 tonnes, suffice for less than 3 days consumption. Steel making ingredient nickel was last quoted at $11,040/11,045 a tonne from Wednesdays last bid at $10,970.
Tin was last quoted at $10,995/11,000 a tonne from $10,900. It has been supported by a dominant position controlling more than 90 percent of cash warrants on LME stocks, reflected in the premium for cash material over the three-month contract. The premium or backwardation, at around $266 a tonne is the highest since March 12.
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