Copper surged to a two-week highabove $7,500 per tonne on Wednesday, as budding signs of increased Chinesepurchases underpinned sentiment and drove prices further away from lastweek's 14-month low.
After leading the broader commodity complex down in late September tocap its biggest quarterly loss in three years, copper has sinceoutperformed its peers with a near 14-percent rally as European debtcontagion fears subsided a bit and Asian demand signals perked up.
"The key driver has come from China," said Nicholas Snowdon, analystwith Barclays Capital in New York.
"We are beginning to see signs of a pick-up in Chinese buying post theGolden week holiday. The first couple of days this week was pretty quiet,but now buying today from the Chinese in noticeably higher."London Metal Exchange (LME) benchmark copper rallied $239 ornearly 3.3 percent to finish at $7,529 a tonne, its priciest level on aclosing basis since late September.
In New York, the key December COMEX contract shot up by 10.30cents or 3.1 percent to settle at $3.3935 per lb, closer to the top of its$3.2385 to $3.4115 session range.
But volumes continue to indicate that the move may lack conviction. Alittle more than 46,000 lots traded in New York, down 17 percent from the30-day norm, according to preliminary Thomson Reuters data.
Copper continued to take its directional cues from Asian equities,particularly the Shanghai Composite , which ended up 3 percent inits biggest single-day gain in about a year.
A technical rally in the euro versus the dollar provided an additionallayer of bullishness to the dollar-denominated metals.
But with such a heavy dependence on China, which accounts for about 40percent of global demand, copper has reacted more to signs of Chineserestocking.
LME copper stocks in South Korea and Singapore, locations nearest toChina, have been declining sharply since the end of September. Latest data showed copper stocks in LME-registered warehouses fell by1,525 tonnes, with canceled warrants -- metal earmarked for delivery -- at10 percent of total stocks.
"We're seeing bonded warehouse stocks for copper at low levels now, andwith the arb opening and China's economy still growing, you have to expectsome hand-to-mouth restocking," said Robin Bhar, analyst at CreditAgricole.
Barcap's Snowdon agreed, adding that any greater clarity or resolutionto the European debt crisis would keep China hungry for metal.
"The Chinese have been extremely concerned about Europe in terms of themarket and where prices could head. Any positive developments there sort ofgalvanizes the confidence of Chinese consumers.""They don't want to miss out on an opportunity to get copper at $7,000to $7,500."In industry news, Freeport Indonesia has ramped up copper concentrateproduction at its strike-hit giant Grasberg mine, to more than 4,000 tonnesper day in October, while almost 79,000 tonnes would be shipped this week.ALUMINUM SHORT-SELLINGAlcoa Inc , the largest U.S. aluminum producer, said an economicslowdown hurt demand and knocked prices for the metal lower, denting itsthird-quarter profit.
In a call with analysts, Alcoa Chief Executive Klaus Kleinfeld blamedthe price drop on, "very offensive short-selling going on by speculators.
"They are betting against aluminum as a proxy for betting against theglobal economy," the CEO said.
Aluminum prices fell by almost 20 percent in the third quarter onglobal economic concerns and Alcoa's share price fell 41 percent during thesame period.
LME aluminium futures were untraded in rings, but bid at $2,239a tonne from Tuesday's close at $2,230.
Metal Prices at 1817 GMT
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T
Metal Last Change Pct Move End 2010 Ytd Pct
move
COMEX Cu 338.95 9.90 +3.01 444.70 -23.78
LME Alum 2248.00 18.00 +0.81 2470.00 -8.99
LME Cu 7525.00 235.00 +3.22 9600.00 -21.61
LME Lead 2070.00 85.00 +4.28 2550.00 -18.82
LME Nickel 19075.00 200.00 +1.06 24750.00 -22.93
LME Tin 23000.00 575.00 +2.56 26900.00 -14.50
LME Zinc 1945.00 33.00 +1.73 2454.00 -20.74
SHFE Alu 16745.00 55.00 +0.33 16840.00 -0.56
SHFE Cu* 54930.00 720.00 +1.33 71850.00 -23.55
SHFE Zin 15205.00 70.00 +0.46 19475.00 -21.93
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07
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