Copper rose on Friday, regaining ground after losses in the previous session, as investors looked to positive signals from top consumer China. Three-month copper on the London Metal Exchange closed at $9,071 a tonne from $8,950 at Thursday's close, registering the biggest weekly gain in five weeks. "The stock data has showed another big drop in inventories in Shanghai," said Barclays Capital analyst Gayle Berry.
"This, together with lower inventories in LME Asian warehouses, is further evidence of pickup of Chinese demand." China is the world's largest consumer of industrial metals, accounting for nearly 40 percent of global demand estimated at around 21 million tonnes this year. Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 14.6 percent from last Friday, the exchange said.
However, copper's recovery is in doubt as patchy US data, a debt crisis in the eurozone and persistent concerns about global economic growth mean commodities will remain under pressure. "The pullback has seen some buying interest from China but I think we may see copper going below $8,500 per tonne before more Chinese buyers come back to the market," said Randy North, a trader at RBC Capital Markets in New York. Large copper smelters in China settled second-half treatment and refining charges with global miner BHP Billiton at almost double the levels seen in 2010, in a move likely to boost spot concentrate rates and metal output in China.
At LME warehouses, rising copper inventories have put pressure on the metal. The latest data shows stocks fell, but total inventories are within 1 percent of 10-month highs and are still up nearly one quarter this year. LME stocks of aluminium fell by 1,075 tonnes, off a record high level of 4.71 million tonnes hit on Wednesday. Cash aluminium to the three-month contract is now in a $17.50 a tonne contango, or discount, that could discourage deliveries to LME warehouses.
Aluminium closed at $2,500 from $2,499 a tonne. "Aluminium looks finely balanced, with strong demand growth being met by even stronger supply growth in 2011. A rising supply surplus means stronger price gains should be capped," ANZ said in a note. "However, a potential rebound in oil prices and a developing energy supply squeeze in China could create a tighter supply backdrop."
Nickel finished at $23,540 - having touched its lowest since December - from $23,555 a tonne on Thursday. "While nickel has been the only metal to exhibit consistent weekly stock draws on the London Metal Exchange since the start of 2011, nickel inventories remain very high by historical standards," National Australia Bank said in a note. Battery material lead ended at $2,507 a tonne from $2,473 a tonne. Zinc closed at $2,151 from $2,135 a tonne and tin at $27,750 from $28,250 a tonne. ETF Securities, Europe's biggest provider of exchange-traded commodities (ETCs), expects the European market for ETCs physically backed by industrial metals to remain small, its head of product development said.