Copper ends firm on improved economic outlook

NEW YORK/LONDON - Copper climbed to within a whisker of record highs, as the dollar slipped and a surge in German investor sentiment reinforced views of improving economic growth prospects.

Since hitting historic peaks at $US9,754 per tonne in London and $US4.4980 per lb in New York this month, copper has struggled to break from a two-week trading range as the impetus to carve out a near-term price move is largely absent, analysts said.

London Metal Exchange （LME） three-month copper ended up $US70 at $US9,700 a tonne, after hitting a session peak at $US9,736.

COMEX copper for March delivery rose 1.60 cents to finish at $US4.4280 per lb, after dealing between $US4.3665 and $US4.4630.

"To break into new highs, you're going to need some type of fundamental impetus and today you just don't have it," futures analyst with Optionsellers.com in Tampa, Florida Michael Gross said.

"Some encouraging data today and a weaker dollar … you think in a strong market that would be enough of a catalyst to move higher," he said.

Often viewed as a good barometer for underlying economic activity, copper bounced after the spike in German investor sentiment.

Gains drew further support from a 28-month closing high in European equities.

But many analysts still expect further subdued conditions before the Chinese Lunar New Year holiday, which runs from February 2 to 8.

"The Lunar New Year and the Chinese president's visit （to the United States from Tuesday） are also probably keeping the bulls a little more to the sidelines," analyst for Country Hedging Inc in St. Paul, Minnesota Sterling Smith said.

Peter Hickson, global basic materials and commodities strategist at UBS, expects a phase of Chinese restocking could provide the impetus for copper to surge past $US10,000 per tonne.

The outlook for copper in the long term is positive as increasing Chinese demand, falling copper grades and difficulties in financing new projects are to underpin prices, according to VTB Capital analyst Andrey Kryuchenkov.

"Copper is certainly looking good in the long run as there is a demand/supply imbalance," he said.

News that Chile's Collahuasi copper mine will ship 20,000 tonnes of concentrate per month via the Arica port until its own sea terminal has repaired a damaged ship loader had little lasting impact.

"It's not so bullish because Collahuasi's going to transport from another port, there may be a temporary blip in the copper price," analyst at Virtual Metals Carl Firman said.

"But I can still see the copper price at $US10,000 a tonne this year on a number of factors."

Inventories

Stocks of lead surged by 29,825 tonnes to a 15-year high of 243,950 tonnes, reflecting large inflows and a supply surplus. Lead finished at $US2,623.5 from a close of $US2,645.

Inventories of copper in LME warehouses fell 1,075 tonnes on Tuesday to 377,925 tonnes. Copper stocks have mostly climbed since mid-December, but are down about a third from cycle highs hit last February at 555,075 tonnes.

Rio Tinto's mined copper output fell nine per cent in the fourth quarter of 2010 from a year earlier. Refined copper output dropped six per cent, the miner said in a quarterly report.

Nickel stocks fell by 414 tonnes to 137,352 tonnes, also little changed on the month to date. Nickel closed up $265 at $26,100 a tonne.

Nickel benefits from accelerating demand from Chinese steelmakers, analysts said.

"Q4 was a strong quarter for stainless steel production and we think we will see another strong quarter, the first quarter this year," RBS analyst Daniel Major said.

"But there are new projects coming on stream and we need to watch out for higher nickel and nickel pig iron supply."