Copper rose on Thursday to track Wall Street gains, as data showing US GDP contracted less than expected boosted sentiment and eclipsed weak jobs data. Copper for three-month delivery on the London Metal Exchange closed at $5,130 a tonne from $5,055 at the close on Wednesday. The metal, used in power and construction hit a day's high of $5,145, its highest since June 15, and a day's low of $4,935.
US shares rallied after the comforting US GDP data, but other numbers showed an unexpected rise in US jobless claims. The latest data added to a mixed economic picture that has recently triggered erratic moves in copper. "It looks like some new optimism rushing through markets," said Robin Bhar, an analyst at Calyon. "US stocks have held their ground pretty well."
"And there's no real sense that there has to be any upward move in US interest rates," Bhar also said of the positive market sentiment. The US Federal Reserve on Wednesday kept interest rates near zero and signalled there would be no rate hikes any time soon. But the Fed warned the economy would remain weak for some time. Copper has risen about 60 percent so far in 2009, driven by aggressive buying by China, the world's top copper consumer.
But analysts say copper faces fresh headwinds as China's stockpiling exercise is starting to tail off and Western economies, still crippled by the economic slowdown, are unlikely to pick up the baton anytime soon. Positive for prices, copper stocks continued their downward trend, falling 3,450 tonnes to 271,600 tonnes - their lowest since mid-November. Aluminium, used in transport and packaging, was $1,684 from $1,660 a tonne.
Total LME stocks of the metal slipped 6,150 tonnes but remain near record levels above 4.3 million tonnes. Helping to support aluminium, on course for its biggest monthly gain since May 1988, were worries about a shortage as many companies with metal are using it as collateral to release cash tied up in stocks. Steel making ingredient nickel closed at $15,625 from $15,500 and battery material lead was last quoted at $1,738/1,739 from $1,705.
Zinc was last quoted at $1,643/1,645 from $1,611 a tonne, while tin was last quoted at $14,825/14,850 from $14,750. The premium for tin for immediate delivery over the three-month contract suggests a possible nearby tightness in the market. Cancelled warrants for tin were 1,280 tonnes on Wednesday, about 7 percent of LME stocks currently at 17,090 tonnes - this suggests that a large percentage of LME inventories are earmarked for delivery.