Copper rose to a two-week high on Friday, on concerns about a decline in inventories in Shanghai and some easing of worries about an economic slowdown in the United States. Benchmark copper on the London Metal Exchange ended the official session at $7,000 per tonne from $6,880 at the close on Thursday. Earlier on Friday it touched $7,065, the highest since November 16.
Inventories monitored by the Shanghai Futures Exchange fell 10,417 tonnes in the week ending on Thursday, after a 21 percent fall the previous week. "There's a bit of concern ... that Shanghai stocks are declining," Robin Bhar, base metals analyst at UBS said.
"People feel a lot more comfortable. Risk appetite has been coming back ... global equities have obviously bounded higher on expectations the Fed will cut rates in December." Expectations of a cut in benchmark rates by the US Federal Reserve to boost economic growth and perhaps even stave off a recession have this week helped equities and copper, widely used in the power and construction industries.
A cut in the rate would take time to feed through to economic activity and analysts say US demand for copper, closely linked to growth, could be capped for some time. Traders said the better than expected business activity in the US Midwest would have bolstered confidence, even though most US economic data, especially from the housing market, has been disappointing.
"I don't think it will go much further than $7,000 or $7,100 because of fears about the US market, and what will happen to construction there," Commerzbank analyst Eugen Weinberg said. "If there were some pickup in homebuilding numbers or prices for housing, that would alleviate fears for the copper market, as would strong equities markets," he said.
Copper has lost more than 15 percent since the beginning of October and more availability of material can be seen in the $45 a tonne discount for cash material over the three-month future.
Early October buyers would have had to pay a premium of $80. Still, many in the market believe demand in China and other industrialising nations will offset lower US consumption. "Even assuming a further slowing of US metals demand, the strength of consumption in other parts of the world means that supply will continue to struggle to keep up," Barclays Capital said in a report.
Aluminium ended at $2,499 per tonne from $2,505 on Thursday. Prices have come under pressure this year as China ramped up production, but analysts think that could change as the country tries to conserve energy and curb pollution.
"We see (the aluminium) market becoming balanced and China no longer a big net exporter," Bhar said. Lead gained to $3,055 from $3,000, tin was untraded at the close, but quoted at $17,075/17,100 from $16,800/16,850, nickel was at $27,095 from $26,900.
Zinc rose to $2,590 from $2,510/2,520 on Thursday. Tracking copper, zinc earlier saw a 2-week high of $2,598. Perceptions that consolidation of mining firms could boost their pricing power has helped the share prices of London-listed miners in recent days. But their fortunes on Friday were mixed. Mining group Anglo American gained more than 4 percent on bid talk linked to Xstrata, which rose more than 3 percent. BHP Billiton was down 0.7 percent.