Copper prices rose to their highest level since June 1997 during Tuesday afternoon London Metal Exchange (LME) trading, spurred by a lower production outlook from US copper producer Freeport McMoRan and against a background of tumbling inventories.
Traders said price trends in New York were also encouraging, providing the impetus for the market to clear the $2,450 level.
"The Freeport news was positive, and with Comex opening up (after the Monday holiday), we found quite a few buy-stops above $2,430/2,435. It was thin at the highs, though," a trader said.
Freeport McMoRan, in its quarterly report, outlined production plans at the Grasberg copper mine in Indonesia. The mine is operating below capacity following landslides during the fourth quarter of 2003, and Freeport cut its forecast for 2004 copper sales 1.0 billion pounds from previous 1.4 billion.
Earlier, the market took overnight news of a tentative contract deal at Teck Cominco's Highland Valley copper mine in its stride, and after a brief dip in Asia regained the $2,400 level in Europe. LME warehouse inventories also fell again - down 5,075 tonnes to 394,175 tonnes - to the lowest since March 2001.
"This is a market that has got its buying boots on - essentially we're looking to take out the 1997 highs on a regular basis now, and the dips are going to be bought," the trader said.
Three months prices peaked at $2,458 before settling to end the open-outcry session at $2,450 a tonne, well up from Monday's kerb close of $2,422.
Nickel rose steadily throughout the session and concluded the kerb at $15,050, up $1,050 from Monday, strongly supported by a large-scale reduction in LME warehouse inventories for the second day running. Stocks fell by 3,234 tonnes to 15,978 tonnes on Tuesday, following Monday's drop of 2,118 tonnes, and are now at the lowest since March 2003.
Aluminium, although $6 higher at $1,626, remains trapped within a $1,600/1,630 range, but shows signs of breaking towards the upside, given a pattern of constructive technical closes, traders said.
"Our technical analyst highlights aluminium's attractiveness from technical chart perspective saying consolidation above trend-line support at $1,586 a tonne implies further near-term gains following a breakout of $1,628, and the way is clear for a retest of $1,754," Ingrid Sternby of Barclays Capital said.
In the other metals, zinc rose $14.50 to $1,040.50, and is now targeting $1,050 once more. Lead gained $8 to $738, while tin was untraded, but indicated $60 higher at $6,400/6,410.