Copper surged close to its seven-month high on Friday, fuelled by expectations that a robust Chinese economy will boost demand for base metals and on further supply tightness looming in Indonesia. London-listed miners like Vedanta Resources, Kazakhmys and Xstrata rose over two percent, driven by stronger metal prices.
Copper for three months delivery on the London Metal Exchange touched a session high of $8,039 a tonne before closing at $7,955, up 1.7 percent from its close on Thursday.
Strong demand from China, dwindling stockpiles and concerns about possible supply disruption lifted copper to $8,100 earlier in the week, its highest since September 7. The all-time high was $8,800, reached last May. "China worries have receded and that's why we will see a firm end to the week," an LME trader said.
Base metal prices fell on Thursday after China's booming 11.1 percent growth rate escalated worries about a possible rate rise. But today sentiment was more upbeat.
"China is looking set to deliver another year of extremely strong metals demand growth even if there are further tightening measures. I do not think that changes their story," commodities analyst Adam Rowley at Macquarie Bank said.
The booming Chinese economy spurred speculation that the central bank would soon raise official interest rates by a 0.27 percentage points in the coming days or weeks, analysts said.
Even in the event of such a move, demand from China would be enough to support the copper market. The copper market remains tight as inventories in LME registered warehouses fell almost 22 percent since early February to stand at 169,075 tonnes on Friday - less than four days of global consumption.
With the market sensitive to news about supply disruptions, workers protesting at Indonesia's Grasberg, one of the world's biggest copper mines, offered further support to prices. "The labour dispute at Freeport-McMoRan's Grasberg mine in Indonesia has caused a fall of capacity utilisation to a mere 20 percent. Thus, the price of copper appears to be well supported," Dresdner Kleinwort said in a research note.
Freeport-McMoRan Copper and Gold's giant Grasberg copper mine is running well below capacity, according to the Indonesian government, and workers have said they are prepared to continue their protests for a month if necessary.
Tin rose 1.5 percent to $13,650/13,675 after the sharp losses earlier in the week on Indonesia approving export permits for two more smelters. One of the new licences was awarded to PT Koba Tin, Indonesia's second biggest producer.
"Tin sold off heavily the previous day on the back of the announcement from Indonesia. We see a rebound after that," Rowley said. Nickel rose 2.5 percent to $48,700 while aluminium eased by $3 to $2,842.