Copper was slightly up on Friday as optimism that stimulus measures would boost liquidity and metals demand in a struggling global economy, especially in top raw materials consumer China, outweighed poor data in the previous session. Three-month copper on the London Metal Exchange rose 0.2 percent to close at $8,281.50 per tonne after giving up 1 percent on Thursday, putting it on track for a weekly fall of about 1 percent, snapping two weeks of gains.
Losses in the previous session were on the back of soft factory data from the US, Europe and China, which suggested governments still have much to do to lift the global economy out of its current rut. Copper has failed to touch fresh highs after hitting a 4-1/2 month peak of $8,422 on Wednesday as doubts set in about its rally of about 14 percent since early August.
Markets have rallied on expectations and then confirmation of quantitative easing (QE) in Europe, the United States and Japan together with infrastructure projects in China. "The physical markets and the fundamentals really don't necessarily justify the rally, so the market's having second thoughts," said analyst Leon Westgate at Standard Bank in London. "The rather volatile, generally sideways trading we've seen is reflective of that - as the market digests QE versus the still lacklustre economic backdrop."
Westgate said he was not a buyer of base metals at current levels based on fundamentals, but was cautious since commodity prices often ignore fundamentals for periods of time. LME copper stocks increased by 2,775 tonnes this week and Shanghai inventories jumped by 10,428 tonnes. "Apparent demand for copper in China has been relatively weak since June, and the period of Chinese restocking between August 2011 and March 2012 may already be giving way to a period in which stockpiles are run down, particularly if high LME prices deter imports of new material," analyst Nic Brown at Natixis said in a weekly report.
In other metals, battery material lead touched the highest in nearly eight months as LME inventories continued to fall. Three-month lead climbed 1 percent to finish at $2,288 per tonne after touching a peak of $2,299.75, the strongest since January 27.
LME lead stocks have fallen by about a fifth since late June. In aluminium and tin, most of the tightness seen this week on nearby spreads has dissipated after the September contract expired. The "tom/next" spread, representing the cost to roll over an expiring contract to the following day, in aluminium was down to a $6 backwardation from as high as $40 on Tuesday and in tin fell to $4 from $25 on Wednesday.
"Data shows that the supply demand situation on the base metals side is getting tighter. Copper is in a deficit and the aluminium and zinc oversupply situation is also tightening," said Daniel Briesemann, commodities analyst at Commerzbank in Frankfurt. "Lead also fell more sharply than other metals in the past few months so it is now catching up but I think it is unlikely that it will go up much more." The global lead market was in surplus by 49,000 tonnes in the first seven months of the year, a monthly bulletin from Lisbon-based International Lead and Zinc Study Group (ILZSG) showed on Wednesday.
Three month aluminium rose 0.2 percent to $2,115 a tonne and tin closed at $20,725 compared to a last bid on Thursday of $20,550. Galvanising metal zinc gained 0.3 percent to $2,117 a tonne and stainless steel material nickel rose 1.6 percent to $18,175.
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