Copper rose to a four-month high on Thursday as strong demand at European bond auctions lessened euro zone debt concerns and as US data boosted prospects for improved metals demand. Benchmark copper on the London Metal Exchange (LME) was bid up more than 1 percent at $8,360 a tonne at 1523 at the kerb close from $8,235 on Wednesday.
Earlier in the session the metal used in power and construction reached its highest level since September 20 at $8,410 a tonne. "There's some decent numbers coming out of the US, there's greater confidence in Europe and there's a potential for support coming out of China to avoid a hard landing," said Deutsche Bank analyst Daniel Brebner.
"This is a critical quarter, there's growing confidence that the euro zone can stay together and will stay together and that politicians will come together to support the region." Spain sold 6.61 billion euros ($8.5 billion) of government bonds on Thursday, more than its announced target, supported by domestic banks and a pick-up in appetite for riskier assets.
Also aiding metals and other risk assets was news the International Monetary Fund is seeking to more than double its war chest by raising $600 billion to help the euro zone pull out of its two-year-old sovereign debt crisis. On the other side of the Atlantic, US numbers were mixed but were not poor enough to dispel signs that have accumulated over the past few months that the world's largest economy is recovering.
US jobless claims fell to near a four-year low last week, while inflation readings in December were tame, though December numbers on housing starts and factory activity in the US mid-Atlantic region missed expectations. "The path of least resistance in base metals seems to be higher as the calmer conditions in the European debt markets are allowing the euro to strengthen," INTL FCStone said in a note.
"Things could unravel quickly, particularly if any one of the upcoming auctions falls flat. Having said that, this will likely not occur until sometime down the road, and so in the meantime the better tone in the European credit markets should offer support, as should the improving macro picture coming out of the US"
The euro was up versus the dollar, making dollar-priced metals cheaper for European investors, with talks between Greece and its creditors still proceeding. Three sources close to the discussion said more progress is needed before a bond swap to reduce the country's towering debt pile is reached.
Copper prices fell by around 21 percent last year, the first annual drop since 2008, as an uncertain global economic outlook raised fears about the metal's demand prospects. The metal is trading around 10 percent higher so far this month. Copper stocks in LME-registered warehouses continued to show a declining trend, dropping by 1,300 tonnes to a fresh 13-month low of 351,200 tonnes, which indicates demand for physical metal is gathering pace.
Upbeat news on supply capped gains in copper, however. Pan Pacific Copper , Japan's biggest copper smelter, has recently received copper concentrate shipments from the Freeport-McMoRan Copper & Gold Grasberg mine in Indonesia after a three-month strike at the mine ended in December.
Aurubis AG, Europe's largest copper producer, warned of slowing demand and price volatility on Thursday, although profits were up 84 percent in its last financial year. "Price volatility is to be expected ... We expect uncertainty in the further demand trend in our copper product sales," the company said, while also saying there was good cause to expect metal prices to remain high.
In other metals, aluminium ended up more than 1 percent at $2,232 from $2,204 a tonne on Wednesday, having earlier hit its highest since late October at $2,237.75. Zinc, used in galvanising, ended at $2,030 from a close of $2,001, having earlier hit its highest since early December at $2,035, while sister metal lead closed at $2,183 a tonne from $2,139, having reached its highest since late September at $2,187. Tin ended at $21,900 a tonne from $21,780, having earlier risen to its firmest since mid-November at $22,135, while stainless steel ingredient nickel closed up at $20,200 a tonne from $19,495, having hit its highest since late October at $20,201.