Copper rose over 2 percent to a two-week high on Wednesday as investors focused on risk and zeroed in on metals with brightening fundamentals, which also included aluminium and lead. Benchmark copper on the London Metal Exchange closed at $9,727 a tonne, compared with $9,490 at the close on Tuesday. Earlier it hit its highest in more than two weeks at $9,740 per tonne.
Aluminium also rallied to its highest since September 2008, and lead approached peaks seen nearly three years ago. "All financial markets have a default stand of optimism. There hasn't been sufficient deterioration of the geopolitical situation to warrant a fall in risk appetite," said analyst Stephen Briggs of BNP Paribas. Supporting copper, Rio Tinto Ltd said it expected global consumption of the metal over the next 20-30 years to exceed the total historical consumption to date.
"Given the current situation in Libya and the fact that investors are still comprehending the consequences of the Japanese crisis, this week has seen a sluggish recovery led by copper," said Kamil Wlazly, a metals analyst at Metal Bulletin Research. In LME stocks data, a fall in copper inventories, used in power and construction offered a little respite for investors concerned about this year's climb in inventories.
Inventories of copper on the London Metal Exchange fell by 200 tonnes to 434,150 tonnes, the latest data showed. But they have risen about 25 percent from mid-December, raising concerns over waning demand. Lead has rallied strongly since Japan's earthquake and nuclear reactor crisis last week, adding to an already brightening fundamental outlook as demand from the global automotive sector heats up.
The metal used in batteries is widely expected to benefit when Japan starts buying the materials it needs to rebuild, as hospitals and businesses turn to battery-powered electricity because of badly damaged nuclear plants. "There was a little bit of buying of lead based on the Japanese scenario," said Nic Brown, head of commodities research at Natixis.
Growing demand not just for new, but also for replacement car batteries in developing nations was a driving force, Brown said. But in the near term, prices may also be gaining steam ahead of a new contract launch in China from Thursday. The Shanghai Futures Exchange lead contract debuts on Thursday and Standard Bank expect SHFE prices to be dragged ahead, tracking the LME figures.
Lead closed at $2,716 a tonne from $2,670, coming close to $2,739.75 tipped last week which was the highest since April 2008. Aluminium finished at $2,631 from $2,600. The metal earlier hit a 2-1/2 year high of $2,639.50 a tonne, boosted in part by rising costs of energy. Tin was not traded on the close but quoted at $30,925/30,930, from $30,150, while zinc ended at $2,424 from $2,331.50 at Tuesday's close up nearly four percent. A relentless surge in stocks, swollen supplies and a ballooning market surplus are expected to ensure zinc prices lag those of other base metals this year. Nickel finished at $26,825 from $26,350.
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