Copper prices rose to their highest in seven weeks on Thursday as opinion polls indicating that Britons favour staying in the European Union boosted sentiment that was also reinforced by a weaker dollar. Benchmark copper on the London Metal Exchange (LME) closed 1.7 percent higher at $4,780 a tonne. It had earlier touched $4,793, its highest since May 6.
The campaign to keep Britain in the European Union received a boost from two opinion polls published late on Wednesday, a few hours before voters begin to cast their votes in the historic EU membership referendum. "The EU referendum has dominated things globally," said Cantor Fitzgerald analyst Asa Bridle. "The lower dollar helps, but copper is still ranging."
Copper, mainly used in power and construction, has mostly traded in a $4,500 to $5,000 range this year and price movements in recent weeks have been largely related to the US currency. Falls in the dollar make commodities cheaper for buyers in other currencies and support demand. One factor limiting the upside for industrial metals has been slow demand growth in top consumer China. Another is an oversupplied market, particularly in aluminium.
Analysts say that aluminium smelters in China could cut output if prices fall below 12,000 yuan ($1,826) and towards 11,500 yuan. Morgan Stanley analysts, however, said that output cuts by China's major aluminium producers would be offset by expansion in the collective output of the country's many smaller players. The bank said that the optimal strategy in a highly competitive market that is under lots of pressure to cut excess capacity is to get bigger.
"Greater market share is more important than spinning a profit," it said in an analysts' note. About 2 million tonnes of new aluminium capacity is set to enter the Chinese market in the second half of the year, said Paul Adkins of consultancy AZ China. "We think demand will start to slow from here on, as small and large downstream factories slow down. We remain worried that demand is slowing just as supply starts to increase," Adkins told the Reuters Global Base Metals Forum.
Three-month aluminium failed to trade in closing rings and was bid up 0.5 percent at $1,642 a tonne. In other metals, zinc slipped 0.3 percent to trade at $2,039 in closing rings after LME data showed inflows of nearly 20,000 tonnes into LME warehouses, which analysts said showed that hidden stocks could weigh on prices. Nickel closed down 0.1 percent at $9,225, lead rose 0.8 percent to $1,730 and tin added 0.5 percent to finish at $17,250.