Copper bounced off two-week lows hit on Wednesday on the back of a weaker dollar and as the market focused on robust growth prospects from China, the world's top consumer of the metal. China's move on Tuesday to tighten its monetary policy had spooked investors on concerns it would hurt metals demand, but analysts said it also highlighted the country's strong growth outlook.
Benchmark copper for three-months delivery on the London Metal Exchange hit $7,298 a tonne, its lowest since December 30, but later rallied to close $30 higher at $7,485 a tonne. Other metals moved into positive territory after hitting multi-week lows, helped by the euro hitting a one-month high against the dollar and a bout of short-covering.
"China story is the main thing today, but euro/dollar's gaining some ground and it's helping," said Andrey Kryuchenkov, analyst at VTB Capital. China took its strongest step towards tightening monetary policy on Tuesday as the world's third-largest economy roars ahead, surprising investors with an increase in banks' required reserves.
Imports of copper to China rose 27 percent to 369,368 tonnes in December, as government stockpiling continued and arbitrage opportunities reappeared between LME and Shanghai prices. But there are also concerns about persistently rising inventories, which posted another hefty rise of 4,600 tonnes to 521,775 tonnes, their highest since March last year.
Stocks stand within reach of their 2009 peak, hit last February, when they touched their highest since late 2003. Traders say this is a major obstacle for further price hikes. Aluminium bounced to $2,294 after touching a two-week low of $2,230 a tonne. LME stocks of the metals used in transport and packaging fell 5,250 tonnes, standing at just under 4.6 million tonnes.
Zinc was at $2,489 from $2,476. Battery material lead was at $2,480 from $2,432. It earlier hit a two-week low of $2,370. Tin traded at $18,000 from $17,895. Nickel closed at $18,300 from $17,700. The metal used for galvanising steel earlier fell to $17,325, its lowest in more than three weeks.
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