Copper hit a 3 week high on Friday as weaker than forecast US inflation data overshadowed worries that the Federal Reserve's move to raise its discount rate signals future monetary tightening. Benchmark copper for three-month delivery on the London Metal Exchange ended at $7,435 a tonne from a last bid at $7,260 on Thursday.
It earlier hit a low of $7,450, its highest in more than three weeks. US consumer prices rose less than expected in January, while prices excluding food and energy fell for the first time since 1982, according to a government report on Friday that soothed worries over rising inflation.
"The inflation data eased fears of monetary tightening but that's also negative for the dollar, so the moves in metals have been largely currency informed," said Daniel Major, analyst at RBS Global Banking and Markets.
The Fed said late on Thursday it was raising the interest rate it charges banks for emergency loans. Markets initially took the decision as a signal that the US central bank was coming closer to tightening its benchmark rate, despite assurances from the Fed to the contrary. "There is a lot of scepticism that there is significant sustainability with respect to the recovery - that it is quite dependent on a combination of low interest rates or fiscal policies," said Deutsche Bank analyst Daniel Brebner.
Traders at the LME said fund buying continued to support base metal prices at lower levels. This was despite analysts' concerns that relatively cheap borrowing rates could be ending.
But highlighting still weak demand outside China - the world's largest metals consumer - latest LME data showed copper stocks fell 300 tonnes only to remain near six-year highs at 554,775 tonnes. Aluminium ended at $2,139 a tonne versus $2,114. LME inventories for the metal, used in transport and packaging, eased 7,025 tonnes but remained near record levels at about 4.6 million tonnes.
Markets are unconcerned about LME stocks, however, as a large portion of the material is tied up in finance deals and unavailable for consumption. On Thursday, aluminium cancelled warrants were at 301,725 tonnes compared with 243,175 tonnes on January 19. Among other base metals, steel making ingredient nickel ended at $20,725 a tonne versus $20,450 a tonne, having earlier hit its highest since mid-August last year at $20,735.
Battery material lead finished at $2,359 from $2,319, zinc ended at $2,359 a tonne from $2,310 and tin was last bid at $16,995 from $17,050. In industry news, miner Xstrata may be forced to scale back production or shut down some of its Mount Isa operations after excessive lead levels were recorded by an air monitoring site, an Australian official said. Also, investors are keeping tabs on operations at Teck Resources' Red Dog mine in Alaska, the world's largest zinc mine, after environmental groups appealed against a permit issued by the US Environmental Protection Agency on Wednesday.
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