Copper stays higher

Copper rose to its highest in a week on Wednesday as the dollar fell and stronger world equities improved risk appetite, but gains were limited on persistent concerns about the health of the global economy. Benchmark copper on the London Metal Exchange closed at $8,970 from $8,830 on Tuesday.
It hit an intra-day high of $9,019.25, its highest since August 10, but is still around 13 percent lower than the record high $10,190 a tonne it struck on February 15. "The (metals) market is undecided but it is likely that growth will slow down in the second part of the year... it is yet to be seen whether this is already priced in," said Eugen Weinberg, commodities analyst at Commerzbank.
In the United States, core producer prices rose at their fastest pace in six months in July on strong tobacco and light truck costs, but weak domestic demand was seen keeping inflation pressures under control. The dollar fell across the board, hurt by steep losses versus the Swiss franc and selling as risk appetite improved. The weaker dollar makes commodities more affordable for holders of other currencies.
"There are pockets of physical buying but it's price based," Steve Hardcastle, head of metals trading at Sucden Financial, said. "There is a certain amount of short-covering taking place in Shanghai and the arbitrage window has been there, or thereabouts, for the last two days: LME buying, Shanghai selling."
The LME benchmark contract was trading at a discount to the Shanghai Futures Exchange most active contract and this prompted more buying from Asia. "We are bearish overall but there is still some short covering to be done in the next 2-3 days before the downward trend resumes," an LME trader said.
If the arbitrage, which opened earlier this month, holds at current levels of around 400 yuan it could encourage increased refined copper imports into China in the next few months, traders have said. "Chinese copper prices are outperforming LME prices, which would incentivise Chinese consumers to step up imports," Credit Suisse said in a note. "Based on our view that the economy should recover moving along H2 2011, we think the current price weakness across metals offers entry opportunities."
China accounts for nearly 40 percent of total world copper demand, and the market has been anxiously waiting for it to start buying again after a lengthy period of destocking. Tin closed at $24,005 from $24,150 while zinc, used to galvanise steel, was $2,215 from $2,181 at Tuesday's close. Battery material lead closed at $2,366 from $2,356 and aluminium was $2,395 from $2,375. Stainless steel material nickel closed at $21,950 from $21,700.