Copper prices bounced, nickel hit a new record high and lead jumped 6 percent on Thursday as the market anticipated future buying from China, analysts and traders said. Three-month copper on the London Metal Exchange closed at $6,110 a tonne, up 1.6 percent from Wednesday's $6,015.
On Wednesday the metal fell 3.5 percent as the market fretted about Chinese growth and demand for base metals. "There's a lot of interest today, prices are up," an LME trader said. "The market doesn't believe Chinese demand is going to fall, in fact it expects China to buy more."
Analyst Michael Widmer at Calyon said that in the short term $6,400 was a possible target for copper. It hit a two-month high of $6,374 on Monday.
"But so far there isn't any hard data about Chinese consumption," Widmer said, adding that Chinese import data for February and March would clarify consumption rates before and after the Lunar New Year. In January Chinese refined copper imports jumped 86.3 percent year-on-year.
The market was also supported by better-than-expected US manufacturing data, according to a survey published on Thursday. The Institute for Supply Management said its index rose to 52.3 from 49.3 in January.
"The bad news...is that upward pressure on prices has re-emerged after disappearing in December and January as commodity and energy prices are now rising strongly again," economist John Kemp at Sempra Metals said in a report.
US inflationary pressures remained a problem, he said.
Sentiment was boosted by falling copper stocks in LME warehouses, down by 2,757 tonnes to 205,400 - some four days of global use.
On the production front, the biggest copper miner in the world Codelco said it produced 1.783 million tonnes last year, down 2.6 percent from 1.831 million in 2005.
Nickel ended at $41,500, below the new record high of $42,200, but above Wednesday's close at $41,395.
Traders said the price had been driven higher by commodity trading advisors (CTAs) - funds that trade using buy and sell signals from black-box trading models.
But analysts say the fundamentals are strong. Nickel has risen by more than 200 percent since January 2006 on persistent worries about supply disruptions, project delays, low stocks and strong demand from stainless steel manufacturers.
Lead ended up at $1,920, a touch below an earlier high of $1,930, but above Wednesday's close at $1,820.
Traders said CTA buying was behind the surge. Aluminium traded lower at $2,795 a tonne from Wednesday's last quote at $2,810/2,815.
Aluminium stocks in Chinese warehouses have risen by some 100,000 tonnes over the past 10 days ahead of the Lunar New Year break, but domestic demand is expected to rise next week, industry sources said.
Traders are also watching the options market, where the number of outstanding contracts to buy three-month aluminium at $3,000 fell to about 5,300 from more than 9,000 early this week. Zinc rose to $3,480 from $3,470 and tin was at $13,350 against $13,200.