Copper prices gained more than 3 percent on Tuesday to hit a 2-week high after strong US economic data fanned optimism sparked by expectations of aggressive US rate cuts.
Aluminium rose more than 5 percent to $2,654.5 a tonne, the highest since November 7, on concern about supplies from China, a major producer of the metal used extensively in the power, packaging and construction industries.
Copper for delivery in three months on the London Metal Exchange ended up at $7,291 a tonne after an earlier high at $7,320 and $7,060 at Monday's close. Copper is a key raw material for the power and construction industries.
New orders for durable goods rose by an above-consensus 5.2 percent in December and a key gauge of business spending also surged.. The news helped equity and commodity markets to extend early gains. "The equity markets really liked the durable goods orders and from a base metals perspective the data is also really good news," said Michael Jansen, analyst at J.P. Morgan.
Jansen added that momentum had gathered pace as speculators cut short positions - bets on lower prices. The US Federal Reserve is expected to cut benchmark interest rates by half a percentage point on Wednesday after a two-day meeting. Last week it slashed rates by 75 basis points to 3.5 percent to help boost confidence.
"Clearly there is the expectation of the Fed riding to the rescue," said Stephen Briggs, analyst at SGCIB. "But there is a big debate as to whether they will be able to rescue us from recession."
Industrial metals have tumbled in recent weeks on growing expectations that US economic problems will hamper growth in countries such as China, which are reliant on exports to the United States. "But I think the more important question is what's going on outside the US, particularly in China, because to a great extent the metals consuming industries in the US have been in recession for a while."
China is estimated to account for about 25 percent of copper demand, making it the world's largest consumer of copper. Norrish said China was also very important in terms of supply, particularly for aluminium, where the smelting process is energy intensive.
"Buying on fundamentals pushed aluminium through the key $2,550 level and the momentum just picked up from there," one trader said, adding that he expected analysts to revise down aluminium surplus forecasts for this year.
Aluminium ended at $2,650 from $2,512 on Monday. Lead finished at $2,770 from Monday's last quote at $2,660/2,664. Traders said lead's earlier rise to an 8-week high of $2,765 a tonne was due to speculative buying. Zinc gained to $2,380 from $2,290, nickel to $27,750 from $27,000 and tin to $16,900 from $16,500.