Base metals climb

Industrial metals rose on Monday, with copper climbing over 1 percent as investors poured money into metals, betting on higher metals demand next year on the back of economic recovery. Nickel prices rallied to their highest in nearly six weeks despite inventories nearing record highs, while zinc rallied to 21-month highs on the back of fund buying.
Benchmark copper on the London Metal Exchange closed at $6,940 a tonne, up from Friday's close of $6,845. The dollar was slightly higher against a basket of currencies, making commodities more expensive for non-US currency holders. Dollar weakness has helped fuel big gains in metals this year but analysts said the correlation between the US currency and metals had slackened recently.
"People don't want to short the market because the recovery in demand is just round the corner," said Alex Heath, head of base metals at RBC Capital Markets. Investment money betting on robust Chinese buying has been another big driver of copper prices this year, which in tandem with the weak dollar has helped buoy copper by more than 126 percent since the start of the year.
"Most of the support is coming from the equity side - the market is basically optimistic about economic prospects," said Eugen Weinberg, analyst at Commerzbank. "Some support comes from the oil front ... funds are still pushing prices up." Equities, seen by some as a proxy for economic growth, broke a two-day losing run on Monday, lending support to copper, the most closely linked of all the metals to the economic cycle.
Also boosting prices, the arbitrage window between Shanghai and London has opened at around 400 yuan in favour of imports, lifting hopes that China's imports may rise. But market sentiment remains undermined by stocks in LME warehouses, which rose 3,100 tonnes to eight-month highs at 479,450 tonnes, indicating still weak physical demand.
Among other industrial metals, aluminium, used in transport and packaging, rose to $2,268 from $2,242. Stocks of the metal in LME warehouses fell 2,175 tonnes but remained near record levels at 4.6 million tonnes. The stockpile surge is having limited impact on aluminium prices as most of the metal is tied up in financing deals.
Also, investors are piling into the metal - which has gained around 10 percent since late November - because it has been largely undervalued compared to most other metals. Stainless steel ingredient nickel ended the day at $17,900 a tonne from $17,130, having earlier hit a six-week high of $18,020 on an announcement that Russia will reinstate a 5 percent export tariff on the metal.
But indicating still weak fundamentals, stocks of the metal in LME warehouses rose 2,040 tonnes to total 150,498 tonnes, near their highest ever levels. "Nickel has been underperforming massively since August and probably on the back of this participants decided to pick it up," said Weinberg.
Zinc, used to galvanise steel, was at $2,438 from $2,405, having earlier hit $2,465, its best level since March last year. Analysts said the rally was technically driven, with fund flows heavily concentrated in zinc because its weighting in commodity indexes has risen due to its strong performance this year. Battery material lead was at $2,310 from $2,320, while soldering metal tin gained $100 to $15,900.