Copper rose on Friday, moving away from five-month lows hit in the previous session as eurozone data showed improved prospects for economic recovery and boosted confidence. Copper for delivery in three months on the London Metal Exchange (LME) closed at $8,790 a tonne, up from a close at $8,725 a tonne on Thursday.
The metal used in power and construction earlier hit a session-high of $8,930 before paring gains as the US dollar strengthened. "We had very decent numbers today," said VTB Capital analyst Andrey Kryuchenkov. "The eurozone GDP growth data was better than expected, and that reassured investors a little bit." Data showed German gross domestic product surged 1.5 percent in the first quarter from the previous three months, exceeding expectations for a 0.9 percent rise.
A 1.0 percent rise in French GDP during the same period also exceeded forecasts and suggested the economic engines of the eurozone were chugging ahead. The euro climbed against the dollar after the strong growth data but then sank to a session low a few hours later. A stronger US dollar makes commodities such as metals more expensive for holders of other currencies.
Big upward movements in the base metals market are unlikely as concerns over the EU sovereign debt remain, according to Kryuchenkov. "Debt problems in Greece and in Europe are not going to go away." For the week, LME copper was largely flat, following a fall of some 5 percent in a broad commodity rout the previous week. But some analysts warned of more volatility in commodity prices due to uncertainty over the eurozone debt crisis and more monetary tightening measures by top consumer China.
Europe's No 2 copper producer, KGHM, expects copper prices to average $8,000-$9,000 per tonne this year, its chief executive said. Copper demand from China is likely to remain strong despite the country's moves to slow growth to control inflation, the CEO of top European copper producer Aurubis said. China hiked its bank reserve requirement ratio yet again on Thursday, signalling that containing inflation and soaking up excess cash remained its top priority even after signs the economy was slowing down.
"Prices will likely move in line with the sentiment surrounding the Chinese fiscal and monetary policy over the coming weeks," Fairfax said in a note. "The main questions are: Are we coming to the end of the government's tightening program? And how much has already been priced into the market?" Stocks of copper in LME warehouses rose to 468,525 tonnes, nearly 35 percent above levels seen early in December, latest data showed.
LME stocks of aluminium rose by 32,075 tonnes to 4,622,825 tonnes - within touching distance of the record high above 4.64 million tonnes hit in January 2010. "It's not surprising because the prompt date is next Wednesday," Credit Agricole analyst Robin Bhar said, referring to the expiry for the May contract.
Cash aluminium traded at a premium against the three month contract of $19.50 versus $8 on Thursday. Three-month aluminium, untraded in rings, was bid at $2,565 a tonne from $2,615 a tonne. Zinc closed at $2,155 a tonne from $2,140 while lead ended at $2,291 a tonne from $2,305. Tin finished at $28,600 from $29,300 a tonne and nickel at $24,400 from $24,500 a tonne.