Copper rises on Japan output data

Copper has rallied as investors took note of improved demand signals from Japan even as they remained concerned about signs that the recovery might slow in the United States.

Benchmark copper for three-months delivery on the London Metal Exchange traded at $US6,580 a tonne at 0908 GMT from a close of $US6,520 on Wednesday. The metal used in power and construction jumped over two per cent earlier to $US6,684.

Preliminary figures on Thursday showed Japan's output of rolled copper product rose 50.4 per cent from a year earlier to 72,627 tonnes in May. Japan's is the world's second largest economy.

"（However）, the statement from the Federal Reserve was quite downbeat. The US economic recovery is slowing, new home sales were not nice at all. But I don't think base metals will go much lower," said Andrey Kryuchenkov, analyst at VTB Capital analyst Andrey Kryuchenkov said.

"We had this significant correction in May, spot demand for physical metals is not bad -- we have significant draw downs in stocks. China will come back in the second half … I think metals have bottomed out here."

Data on Wednesday showed sales of new US single-family homes fell to the lowest level in four decades in May, while the Fed acknowledged a faltering pace of US economic recovery and vowed to keep rates exceptionally low.

"（But） the strength in Japan's copper output is supportive after the kick in the guts to sentiment from the US home sales data," ANZ Banking Group Ltd senior commodities analyst Mark Pervan said.

In the wider markets, equities, seen by some as a proxy for economic growth, steadied in Asia but fell in Europe as miners gave up gains built on hopes Australia's new Prime Minister would compromise on a controversial mining tax.

Solid

Indicating solid demand for copper, latest data showed LME copper stocks fell 1,725 tonnes to 454,700 tonnes, their lowest since early December 2009. Stocks have been falling consistently since peaking at 555,025 in February this year.

Among other industrial metals, aluminium was at $US1,948 tonnes from $US1,942, with LME stocks falling 10,300 tonnes to total 4.45 million tonnes. Although this headline figures is high, it is off the record peak at 4.6 million.

Also, most of the record stock is tied up in financing deals and unavailable to consumers, and aluminium demand is rising, as indicated by improved premiums this year and falling stocks.

"Aluminium is plagued by over-capacity and a hefty supply surplus. However, the over 20 per cent fall in price since April has now taken it into value territory," RBS said in a note.

"On a three year view, aluminium has one of the most promising price profiles, with upside of over 60 per cent from the current price."

Zinc, used to galvanise steel, was at $US1,843 from $US1,830, while battery material lead, a sister-metal to zinc, was at $US1,814 from $US1,815. Zinc prices have risen some 17 per cent from a low of $US1,577 hit in early June.

"The speculative buyers are back and are pushing prices higher especially zinc," a metals trader in Shanghai said. "We are not sure what their reason is, but, they right now just want to beat the short sellers. It's a continuing fight."

Tin was at $US18,000 a tonne from $US17,850, and nickel was at $US19,415 from $US19,275.