Copper reached its highest price levels in about two weeks on Thursday after Portugal announced it would accept a bailout from the European Commission, but then pared some gains as a new earthquake hit Japan. Copper for three-month delivery on the London Metal Exchange (LME) closed at $9,670 a tonne, from a close of $9,605 on Wednesday. It hit a two-week high at $9,753 a tonne as markets welcomed debt-ridden Portugal's announcement it would make a formal request for European aid.
"The fact that Portugal accepted the bail-out calmed markets down. What Trichet said about Portugal was also positive," said VTB Capital analyst Andrey Kryuchenkov. The European Central Bank (ECB), headed by Jean-Claude Trichet, acknowledged it had encouraged Portugal to seek aid in view of the country's financial situation. But the metal used in power and construction then slipped back after an earthquake of magnitude 7.4 shook the north-east of Japan and a tsunami warning was issued for the coast, already devastated by last month's quake and tsunami.
"It is quite surprising that the market has not moved more," said Kryuchenkov. In line with expectations, the ECB raised its key interest rate by 25 basis points to 1.25 percent, tightening to counter price pressures in the region. Expectations of healthy copper Chinese import data for March supported market sentiment.
"The numbers are expected to show a rebound from depressed February levels, although the possibility of a disappointment cannot be ruled out," MF Global said in a note. Capping gains, the euro fell against the dollar after Trichet said the ECB did not decide whether the interest rate hike was the first in a series.
Copper was little changed after data showed that new US claims for unemployment benefits fell by slightly more than expected last week, pointing to firming labour market conditions. Tin hit a session high of $32,790, just $9 off a record peak in mid-February. The metal later closed at $32,550 a tonne from $32,100.
Keeping optimism about nearby demand in check, copper inventories at LME warehouses rose 1,500 tonnes to total 442,375 tonnes, at their highest since early July after rising steadily since December. But long-term fundamentals remained positive for copper as a supply deficit is expected this year, analysts said. Rio Tinto's copper unit chief executive said the world copper market could see a supply deficit of half a million tonnes this year and that the shortage may extend beyond 2013.
Aluminium closed at $2,672 a tonne from $2,670. "Ali is still strong because of unrest in the MENA region," Kryuchenkov said adding that there are some aluminium refiners at risk of disruption in the area as political tensions continue. Zinc closed at $2,453 a tonne from $2,450. Battery material lead finished at $2,790 a tonne, from Wednesday's close of $2,820, while nickel ended at $26,800 a tonne from $26,425.