Copper prices hit their highest in more than three months on Thursday, boosted by gains for equities, increased confidence in global growth prospects and a lower dollar. Benchmark copper on the London Metal Exchange ended 1.4 percent higher at $4,856 a tonne. The metal used in power and construction earlier hit $4,848, its highest since November 12, though analysts were cautious about the potential for further gains.
Equity markets in Europe and the United States have rallied in recent days in response to receding worries about the health of the US economy. In China, the impetus came from monetary easing and expectations of further stimulus. "There will be further gains, but it will be necessary to see economic improvement, not just in China, but also globally," Commerzbank analyst Eugen Weinberg said. "The risks come from China. If we have more data showing a slowdown, then Chinese equities and metals could come under pressure again."
Data showing the US non-manufacturing sector expanded at a slower pace in February than January pushed down the US currency, making dollar-denominated commodities cheaper for non-US firms. China accounts for nearly half of global copper consumption estimated at about 22 million tonnes this year. China's demand growth slowed to about 2 percent last year, compared with more than 5 percent in previous years.
"The trend slowdown in China and the structural shift towards less resources-intensive sectors of the economy will see demand for base metals continue to weaken," National Australia Bank said in a note. Other base metals also gained on growth and demand optimism. Three-month aluminium slipped 0.8 percent to $1,577 a tonne, though the $1,595.50 hit during Thursday's session was its highest since the middle of October.
Zinc rose 1.5 percent to $1,843 and lead climbed 1.2 percent to $1,838. "Tighter zinc supplies this year might mean the market is balanced this year, but it will also depend on demand from steel producers, which doesn't look too healthy," one trader said of the metal used to galvanise steel. Tin ended up 1.7 percent at $16,470 a tonne after touching a seven-month high of $16,580. Fears of shortages and falling stocks have fuelled the metal's gains in recent months.
Nickel rose 3.1 percent to a three-month high of $9,000. "The strong decline in Chinese finished nickel production may be an indication that high-cost Chinese production is being forced out of the market," National Australia Bank said. "However, some of that will be replaced by Chinese-commissioned output from Indonesia."
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