Copper up as US prospects brighten

Copper made modest gains in London on Friday, but US copper surged to near record levels as an improved US economic outlook.

While an improved US outlook pushed copper up, concerns about Chinese demand kept sentiment in check.

Three-month copper on the London Metal Exchange closed at $9,650 a tonne from $9,620 at Thursday's close. The metal used in power and construction hit a record high of $9,754 a tonne on Jan 4.

Advertisement: Story continues below In New York, the benchmark March futures contract rose 0.8 per cent, or 3.50 cents, to settle at $4.4120 per lb on the COMEX division of the NYMEX exchange.

The session top at $4.4395 per lb was the contract's highest since Jan 4, and approaching the record peak at $4.4980 per lb set on Jan 3.

Copper was dented earlier by monetary tightening measures from China, but turned slightly positive as the euro headed for its best week in more than 1 1/2 years, making metals cheaper for non-US investors.

But, definitive gains came from a jump in US equity indices, an increase in US industrial production, and Federal Reserve officials' statements suggesting economic growth and therefore demand for copper will go up in 2011.

"This is really a very obvious scenario. The Dow Jones （industrial average） is up 58 points, copper is up 3.50 （cents a lb）. Copper is an industrial metal. It follows the industrial average," said Scott Meyers, senior trading analyst with Pioneer Futures in New York.

He pointed out that investors buy copper, not as a hedging instrument as with gold, but rather as "an industrial seasoning investment tool that goes in your stock portfolio."

Optimism about corporate earnings, bolstered by JPMorgan Chase earnings and a stronger first-quarter outlook for chip-maker Intel, lifted US stocks and set the S&P 500 on the path for seven straight weeks of gains.

An improved view of US economic growth also lifted copper.

Federal Reserve Chairman Ben Bernanke said on Thursday the economy was "moving in the right direction" with the risk of troubling deflation falling.

On the supply side, operations were normal at Peruvian copper mine Cerro Verde after unionised workers reached a partial accord with management before a planned strike, a worker at the mine said.

The outlook for copper remains positive due to expectations of a supply deficit this year.

Stocks of copper in London Metal Exchange fell 1,125 tonnes to 376,225 tonnes.

Since Dec 9, they have risen about 30,000 tonnes, raising some concerns about demand. However, analysts underlined that stocks were down 30 per cent since they hit a 6 1/2 year high in mid-February 2010.

Aluminium stocks rose to 4,435,000 tonnes. Aluminium closed at $2,472 from $2,482 a tonne.

Zinc closed at $2,457 from $2,462 a tonne while battery material lead was at $2,678 from $2,635 a tonne.

Tin was unchanged at $26,850 a tonne. Nickel closed at $25,875 from $25,550 a tonne, holding near its highest since May 2010.