Copper rose on Thursday on the London Metal Exchange, benefiting from prospects of improving global economic growth in the econd half while supply stays constrained, although a flight from risk in broader markets capped its advance.
Three-month copper on the LME traded at $9,670 a tonne at 12:23 SA time, up from a close of $9,650 a tonne on Wednesday.
The metal, used mainly in power and construction, rallied to $9,789.75 last week, its highest since early April and within five percent of its all-time $10,190 peak hit in February.
“The price is already pretty high so as soon as there are any concerns about Europe or the US then you're going to see pullbacks...(but) you've got a pretty bullish demand story and a pretty weak supply story. That's all pointing to higher prices,” said analyst Dan Smith of Standard Chartered.
“Growth in Japan is going to be pretty good in the months ahead and China is pretty strong. Growth is not going to be spectacular in the US, but we do think it will accelerate. Obviously that reduces the risk of QE3,” he added.
Data this week that showed still robust economic growth in China, the world's top consumer of the metal, despite a series of tightening measures, has eased concerns that stricter monetary policy will severely hit copper consumption.
China accounted for almost 40 percent of refined copper demand last year.
China's annual gross domestic product growth eased to 9.5 percent in the second quarter of 2011 from 9.7 percent in the previous quarter, but was still stronger than market expectations of 9.4 percent.
In wider markets, risk sentiment was hurt after rating agency Moody's warning that the US economy's top credit ranking may be in danger, capping the metal's advance.
Moody's said late on Wednesday there was an increased possibility the statutory US debt limit would not be raised on a timely basis, leading to a default on US Treasury debt obligations.
The flight from risk on Thursday grew alongside concern about the euro zone's own problems over delays to policymakers' plans to discuss the region's deepening debt and after Fitch downgraded Greece deeper into junk territory on Wednesday.
Earlier, comments by US Federal Reserve Chairman Ben Bernanke that there could be further stimulus if needed, had weighed on the dollar and aided metals, said Commerzbank.
“Fed Chairman Bernanke's comment in his testimony before the US House of Representatives that the US may need further stimulus measures put substantial pressure on the US dollar yesterday,” Commerzbank said in a note.
“The prospect of new liquidity seeking attractive investment alternatives lent support to commodity prices in general. Metal prices profited from this trend too,” Commerzbank said.
A weaker dollar makes commodities less expensive for holders of other currencies.
DWINDLING ORE
Global miner Rio Tinto said on Thursday its mined copper was down 24 percent on the second quarter of 2010, primarily reflecting lower grades at its 30 percent-owned Escondida mine and wholly-owned Kennecott Utah Copper division.
Refined copper production also fell, to 89,900 in the second quarter from 90,600 tonnes in the same quarter last year.
Lower ore grades and strikes at the world's top producers, including Codelco in Chile and Freeport McMoRan Copper & Gold's continue to dog the outlook for copper supply growth, added Standard Chartered's Smith.
“There's a lot of problems simmering in the background. It's an old story but things seem to be getting worse rather than better,” he added.
In other metals, zinc, used in galvanizing was at $2,384 from $2,361 on Wednesday's close.
Battery material lead was at $2,713 from $2,701 and aluminium was at $2,520 from $2,513.
Nickel was at $24,080 from $23,975.
Tin was at $27,300 from $27,400. Adding to support for prices, Indonesia's Timah, the world's largest integrated tin miner, expects a slight decline in sales, according to a local newspaper report.
Production and sales of refined tin were forecast to reach 40,000 tonnes in 2011, down slightly from 40,413 tonnes in 2010 due to competition from illegal miners in the main producing island of Bangka and Belitung. - Reuters