SINGAPORE--London Metal Exchange rose to its highest level in 2007 Tuesday and looked set to test key resistance levels, as recent gains and bullish sentiment on Chinese consumption prompted speculative buying and short covering, traders said.
Copper's break above $7,000 a metric ton at midday helped firm sentiment towards other base metals, which rose across the board.
Three-month copper as of 0700 GMT was trading at $6,990/ton, up $20 from the London Monday afternoon kerb. Earlier in the session it reached $7,015/ton, its highest since Dec. 6, 2006.
"The Chinese (buying) interest is still growing and I guess people are just trying to get on board," said a Hong Kong-based trader at an international commodity house.
However, as volumes in the copper market were thin, traders weren't convinced copper had made a significant breakthrough.
Traders said the thin numbers were a sign that funds and technical traders had not yet emerged as strong buyers.
"For funds to buy, they need it to close above $7,000/ton," said a trader at a Japanese commodity house.
The trader said copper's technicals strengthened overnight, after breaking and closing above $6,900/ton, its 200-day moving average and a resistance level on a trendline going back to copper's May 2006 peak at $8,800/ton.
Several traders said $7,200 is a key resistance level for three-month copper, the level it hit last Dec. 5. A break above that would clear the way to a rally towards $7,800, the Japanese trader said.
A failure to break above $7,215 would likely mean it would return to its recent range of $6,600-$6,950/ton, said a Tokyo-based trader at a major Japanese commodity brokerage.
"If the market breaches those levels ($7,000 and $7,215), I'd have to go bullish," the trader said.
Despite hitting new highs Tuesday, traders said copper's lack of fresh, bullish fundamental news may eventually weigh on the metal. Some pointed to disappointing U.S. manufacturing growth in March and a drop in business confidence among large Japanese manufacturers in the latest Bank of Japan Tankan survey, as bearish factors.
LME stock arrivals should provide key direction on London's opening, they said. Stocks at the warehouse in Busan jumped by 5,000 tons Monday. Traders said the stocks may have been from China, since physical traders could make a profit exporting copper, as LME copper is rising faster than prices on the Shanghai Futures Exchange.
Aluminum, zinc and nickel all drew support from copper's rise. Aluminum was up $10 at $2,765/ton, zinc had gained $20 to $3,170/ton and nickel was up $800 at $46,200/ton.
As of 0700 GMT, three-month tin was last quoted at $13,740/ton and was untraded in Asia; lead was at $1,930/ton, up $5 from the London PM kerb.
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