Copper hit its highest in more than two months on Thursday, as a weaker dollar and improving fundamentals supported prices, but gains were capped by concerns about US economic recovery and metals demand. Benchmark copper for three-months delivery on the London Metal Exchange closed at $7,010 a tonne from a close of $6,850 a tonne on Wednesday. It earlier hit $7,050 a tonne, its highest since May 14.
"It's a combination of factors," said Gayle Berry, an analyst at Barclays Capital. "Inventories continue to be drawn down on the LME. If you look at what the fundamentals have been doing - they are shaping up to be quite positive." She added that data showing a copper deficit from the International Copper Study Group on Wednesday, followed by comments by Chinese Premier Wen Jiabao on consumption on Thursday, had also boosted overall sentiment. Copper stocks at LME-registered warehouses dropped 1,100 tonnes to 416,525 tonnes, extending a fall that started in February. Copper stocks at LME warehouses hit 555,075 tonnes in late February, the highest level since October 2003.
Aluminium was untraded but last bid at $2,044 a tonne from $2,008 after earlier hitting $2,061.75, its highest since May 28. LME stocks for the metal, used in transport and packaging, fell 4,075 tonnes to 4.41 million tonnes, and are down from record levels above 4.64 million tonnes touched in late January.
"Over the next few months, the weakest commodity sectors are likely to be those in which Chinese production growth is outpacing its own domestic requirements," Barclays said in a note. "Steel, aluminium and zinc all fall into this category, with steel in particular hit by recent weak sentiment in the property sector." Zinc closed at $1,948.50 a tonne versus $1,915, after earlier hitting a near two-month high at $1,957.75 a tonne.
Battery material lead ended at $1,940 a tonne from $1,865. Lead earlier hit $1,945, its highest peak since May 17. Tin was untraded at the close but last bid at $18,550 a tonne from a last quote of $18,370/18,375 on Wednesday, but earlier hit a near three-month highs at $18,600. Nickel ended at $20,250 a tonne from a last quote of $19,495/19,500, down from an earlier peak and three-week high at $20,251.
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