Copper rallies

Copper rose more than 2 percent on Monday as equities rallied, but the market was still hounded by worries about oversupply in China, the world's top copper consumer. Copper for three-months delivery on the London Metal Exchange closed at $4,520 a tonne, from $4,450 on Friday. Copper earlier hit a day's low of $4,343 a tonne.
"Equities are a bit firmer this afternoon and that's been enough to take that downward pressure off (copper) prices, but overall sentiment in the market is still very much about concerns over Chinese demand," Barclays Capital analyst Gayle Berry said.
Copper has nearly doubled in value so far this year, largely thanks to investor and government buying from China, which the market now fears is starting to subside. China's copper imports hit a record high in April, when output was at the second highest.
"The China story is in the background. A lot of the imports seem to be for stockpiling rather than going into consumption. The bulk of it is going to stock building by the government and consumers and that's creating the oversupply," analyst Robin Bhar at Calyon said. The arbitrage opportunity between Shanghai and London, which has been a major factor driving copper imports, has narrowed, but some analysts still see imports remaining high in May.
But falling copper inventories helped support the metal used in power and construction. Stocks dropped 4,250 tonnes to 353,550 tonnes, their lowest since early January. Cancelled warrants - material set to leave the warehouses - fell to 59,850 tonnes from Friday's 61,300 tonnes.
"Coming toward the start of the summer lull, Chinese demand for copper will slow from the peak season in the second quarter, especially from the home appliance industry," Macquarie said in a note. Aluminium closed at $1,520 from $1,522, having touched $1,497 - its lowest since May 1. LME's aluminium inventories have risen to within a stone's throw of a record high 4 million tonnes.
The outlook for aluminium remains grim at the outset of the market's traditionally quiet third-quarter period. Zinc was at $1,518 a tonne from Friday's $1,495 a tonne, while battery material lead was last quoted at $1,485/1,490 from $1,482.
The global zinc market was in surplus by 187,000 tonnes in the first three months of 2009, the Lisbon-based International Lead and Zinc Study Group's (ILZSG) latest monthly bulletin shows.
The group said the global lead market was in surplus by 33,000 tonnes in the first three months of 2009. Tin was at unchanged at $13,650 a tonne. Falling tin output in China, shrinking exports by Indonesia and a physical squeeze on LME look set to support tin. Nickel was at $12,350 a tonne from $12,425.