Copper rose to its highest since May 2006 on strong stock markets after better-than-expected economic data from the United States was released on Wednesday, analysts said. Copper for delivery in three months on the London Metal Exchange ended the day at $8,690 per tonne, compared with $8,410 at the close on Tuesday, and a 22-month peak.
US stocks rose on Wednesday, with the S&P 500 briefly 1 percent higher and the Dow Jones industrial average up 0.7 percent by 1644 GMT, after stronger-than-expected data from the Institute for Supply Management about the US services sector eased some worries about the economy.
"It has basically followed equity markets and overall sentiment, so the ISM (data) would have helped," said Eugen Weinberg, analyst at Commerzbank. Earlier, a market focused on global economic slowdown and weak demand growth had dragged copper down to $8,316, its lowest since February 26, while lead fell by more than 5 percent, a move it almost completely reversed by the close.
Talk of recession in the United States and the knock-on effect on the world economy including China, mean industrial metals markets are vulnerable, analysts say. "The demand profile is softening. We're still in positive territory for demand growth, but it is by no means spectacular," said Michael Jansen, analyst at J.P. Morgan.
Copper, used widely in the power and construction industries, is trading around $200 below its record high of $8,800 a tonne set in May 2006, as the influx of new money into commodity markets reached a crescendo.
The price gain of nearly 30 percent since the beginning of this year also coincided with falling stocks of copper in LME warehouses - down 30 percent to below 140,000 tonnes. Lead closed at $3,350 from $3,365 after earlier hitting a session low of $3,180. Traders said the sharp sell-off was sparked by a break below a key support level at $3,270 and some talk of lead substitution in batteries.
Option expiry - when contracts to buy or sell three-month LME metals have to be exercised before they mature - passed quietly as a large numbers of outstanding calls to buy copper and aluminium were at strike prices below current levels. Aluminium closed at $3,208 a tonne from $3,115 on Tuesday. The energy-intensive metal has been buoyed by supply disruptions in South Africa, where a power crisis has hit economic activity.
Tin closed at $19,250 a tonne from $19,050 on Tuesday when it hit a record high of $19,375, a rise of about 20 percent since the beginning of this year. Zinc ended the day at $2,815 a tonne from $2,780 on Tuesday and nickel at $33,400 per tonne from $32,845. Nickel, a key ingredient for stainless steel makers, is up nearly 20 percent since early February. It has been boosted recently by a strike at BHP Billiton's Cerro Matoso mine nickel mine in Colombia.