Copper rallied to a four-week high on Tuesday, supported by a firmer euro after expectations mounted that a second aid package for Greece would get the go-ahead and after a series of poor US data. Benchmark copper on the London Metal Exchange closed at $9,220 a tonne from a close of $9,199 on Friday. It earlier hit $9,278.50, its highest since May 4. London markets were closed on Monday for the UK Spring bank holiday.
The metal used in power and construction is steady compared to the start of the month, having recovered losses from a drop as part of a broad sell-off in commodities in early May. It hit a record high of $10,190 in mid-February. Copper's inverse correlation with the dollar has reasserted itself, analyst David Wilson of Societe Generale said, while a moderating macroeconomic backdrop for demand suggests prices may already have seen their peak for the cycle.
"The US is juddering in terms of recovery and there is still nervousness over Europe. You've also got the prospect of interest hikes later this year," he said. The euro hit a three-week high against the dollar on Tuesday after a report said Germany could make concessions on efforts to put together a bailout for Greece, helping to ease fears over a Greek debt restructuring.
End of month trading may also be helping support prices, said analyst Robin Bhar of Credit Agricole. "Today we've got trading for the last day of the month, so month-end window dressing I suspect is keeping things firm." Copper prices also gained support from news top producer Chile's copper output fell 3.9 percent in April compared with a year earlier to 438,340 tonnes, the National Statistics Institute said.
Chile is the world's largest producer of copper, accounting for around one third of total global production. Lending support to LME aluminium was news that China had raised its electricity prices for some users, which Barclays Capital said could affect at least 28 percent of smelters in the world's top aluminium-producing nation.
"This increase in power prices will put further upward pressure on the production costs of an industry and a country where marginal production costs are already at a record high," it said in a research note. China said on Monday it would raise electricity prices for some users by about 3 percent, the first hike since 2009 as it tackles its worst power shortage in seven years.
LME aluminium stocks fell 3,525 tonnes to 4,699,300 tonnes, off a record high of 4.71 million tonnes but cancelled warrants, the metal tagged for removal from warehouses, jumped by more than 50,000 tonnes, mostly in Singapore. Aluminium, having also hit a four-week high of $2,671, closed at $2,677 from $2,625 a tonne. Prices have jumped some 8 percent in the past week.
Tin closed at $27,940 from $27,500 a tonne while zinc closed at $2,266 versus $2,275. Battery material lead was untraded at the close, but last bid at $2,521 from $2,505 a tonne. China plans to phase out battery-powered e-bikes that exceed speed and weight limits published 12 years ago, a move that could force small manufacturing plants to close and cut demand for lead there. Nickel closed at $23,590 from $23,100 a tonne.