Copper ends firm, discounts China rate move

NEW YORK/LONDON - Copper ended firm on Friday after another round of monetary tightening in China failed to surprise bullish traders who held their bets on healthier demand prospects for industrial metals this year.

China raised bank reserve requirements by 50 basis points, showing no let-up in a campaign to stamp out stubbornly high inflation.

Sensitive to demand from a country accounting for nearly 40 per cent of estimated global consumption this year, copper prices initially fell on the news. Losses were limited and prices bounced back into positive territory as traders weighed longer-term considerations.

"These Chinese rate moves are already priced into the market," said Frank Lesh, broker and futures analyst with Future Path Trading in Chicago.

"It's just tapping on the brakes. It doesn't stop people from consuming ... the Chinese populous will still want their dryers, their washing machines, air conditioners ... expect the middle class in China to continue to grow and consume."

London Metal Exchange (LME) three-month copper closed up $US58 at $US9,860 a tonne, a little more then 3 per cent away from its all-time record of $US10,190.

COMEX copper for March delivery eased 0.20 cent to settle at $US4.4820 per lb, extending a phase of consolidation from Tuesday's record of $US4.6495.

Analysts continued to see good technical support at a longer-term trendline near $US4.41.

Rally not over

Copper is widely expected to build on its nearly uninterrupted rally in the second half of 2010 as ore grades decline, new mines remain scarce and top buyer China grows.

Supply-side concerns in the nickel market gave a boost to the broader base complex.

Brazilian miner Vale said Friday it will lose around 5 per cent of its total 2011 nickel production due to a 16-week shutdown of a smelter furnace in Canada.

"That's given the sector a bit of a boost," Stephen Briggs, an analyst at BNP Paribas, said. "You can't keep metals down. They tend to move in a pack and you can't fight it."

"Sentiment generally is so positive."

Nickel, untraded at the close, was last at $US29,150/29,155 a tonne, from a close of $US28,490 a tonne.

"The stoppage of the furnace implies a loss of an estimated 15,000 tonnes of refined nickel, equivalent to 5 per cent of total planned production in 2011," Vale said in a statement.

Supporting metals, the euro gained versus the dollar on a media report that quoted a senior European Central Bank official as saying that interest rates could be raised.

A weaker dollar attracts non-U.S investors to metals.

Copper stocks at six-month high

A 725-tonne build in LME copper stocks placed them at a six-month high at 407,925 tonnes. This follows weekly data from China showing copper inventories rose 11.7 per cent from last Friday.

Aluminum stocks, which have neared record highs of 4,640,750 tonnes hit in January 2010, fell 5,025 tonnes to 4,593,175 tonnes.

Zinc hit a three-month high of $US2,565 a tonnne before closing up $US39 at $US2,553. Traders said some investors had pulled out of copper to buy zinc, which was the worst performer among industrial metals in 2010.

OTZK, Bulgaria's second-largest zinc and lead smelter, said it plans to raise its zinc output this year while capping its lead production due to environmental concerns.

The state of the tiny zinc market in general -- and the processing fees miners pay to smelters to turn concentrate into finished metal in particular -- will be actively discussed when the industry gathers at this year's International Zinc Conference from Feb. 20 to 23 in Cancun, Mexico.

(Source: http://www.businessspectator.com.au/bs.nsf/Article/METALS-Copper-ends-firm-discounts-China-rate-move-E7RE6?opendocument&src=rss&WELCOME=REGISTERED%20OK)