Copper prices firmed slightly on Monday on signs of stronger demand and as the market fretted about supply disruptions in China, which also helped to buoy aluminium.
Copper for delivery in three months on the London Metal Exchange ended the day at $7,260 a tonne, from $7,250 on Friday, when the metal used widely in the power and construction industries hit a two-week high of $7,389. Analysts say rising demand can be seen in stocks of copper in LME warehouses, which have fallen by more than 10 percent since January 4 to 177,050 tonnes.
Stronger sentiment has been reinforced by the rising number of cancelled warrants - material no longer available to the market - in LME warehouses. "In the copper market you have healthy demand reflected in another rise in cancelled warrants," Lehman Brothers analyst Michael Widmer said.
Aluminium closed at $2,665 a tonne from $2,655 on Friday when it hit a 6-month high of $2,738 a tonne. Production of the metal used in power, packaging and construction is energy intensive and speculators watching the power problems in China and South Africa have been betting on higher prices.
Many have cut their short positions - bets on lower prices - and added to the upward momentum in aluminium prices over the past week. "I was expecting a surplus in aluminium this year, but after all those supply disruptions, I now have a market that is more or less in balance," Widmer said.
The shut downs have also given zinc a reprieve from selling pressure on expectations of rising supplies. Prices last week rose to $2,589, the highest since January 9. Zinc slipped marginally on Monday, ending the day at $2,470 from $2,475 on Friday. Lead traded at $2,805 a tonne from $2,825/2,830 on Friday, tin was untraded but quoted at $16,750/16,800 from $16,900 and nickel at $27,100/27,200 from $27,700.