Copper rose on Monday as market sentiment brightened in the wake of solid U.S. manufacturing data last week, while expectations that emerging market demand will pick up later this year also supported prices in holiday-thinned trade.
Benchmark copper on the London Metal Exchange closed at $9,455 (U.S.) per tonne, up from a close of $9,435 on Friday.
Earlier, the metal used in power and construction hit a session high of $9,520.25 a tonne, its highest since April 28.
"There does seem to be a tightening in the copper market in the middle of the year, but we think the deficit this year is only going to be in the order of 100,000 tonnes, much smaller than consensus expectations," analyst Andrew Keen of HSBC said.
Keen said there were signs of a demand pick-up in Asia as well as other regions, and while in Europe sovereign debt concerns were still a factor, fundamentally the emerging market growth story was intact.
"The big number that matters is the Chinese GDP number, and as long as that comes out north of 8 per cent it's difficult to get any kind of slack in the commodity markets," he said.
"(Greece) matters because of sovereign wealth and liquidity, but for fundamental metal demand the big issue is sustained emerging market growth and that appears to be alright."
The pace of growth in U.S. manufacturing picked up for the first time in four months in June, surprising investors and fueling optimism that the recent economic slowdown would be temporary.
China's PMI data, however, dipped further in June, pointing to a contraction in factory output for the first time in 11 months.
China's gross domestic product for the second quarter is due on July 15. U.S. markets were shut on Monday for its independence day holiday.
A slightly stronger dollar against a basket of currencies weighed on metals prices.
The euro eased from one-month highs against the dollar after Standard & Poor's said a debt rollover plan being considered for Greece may put the country into selective default.
A stronger U.S. currency makes dollar-priced commodities costlier for holders of other currencies.
As investor focus switches from economics to fundamentals, supply tightness and expectations of growing demand lend support to copper prices, analysts said.
"An underlying improvement in demand for aluminum and copper in China and Japan is providing support," Standard Chartered said in a note. "Physical premiums have also risen for copper, and both aluminum and copper exchange inventories have fallen."
Inventories of copper on the LME fell 725 tonnes to 462,725 tonnes, their lowest in more than two months. Stocks of copper on the Shanghai Futures Exchange have also fallen in the past few months to close to 20,000 tonnes from more than 80,000 tonnes in mid-February.
Stocks of aluminum on the LME also fell, to 4.48 million tonnes, their lowest in more than five months, in part due to a pick-up in demand but also to the reshuffling of stock among warehouses.
Aluminum , used in transport and packaging, was seen at $2,510 a tonne on the close from $2,503. Prices tested the 200 day moving average of $2,488 a tonne but closed above the key watermark. A break of this level would spur technical sales, traders said.
"A solid close below this level will signal a breakdown in the market," said RBC Capital in a note.
Zinc , used in galvanizing steel, ended at $2,398 from $2,360 at Friday's close. Battery material lead finished at $2,684 from $2,674. Tin was untraded but quoted at $25,650/$25,675 from $26,050. Nickel finished at $23,175 from $23,000.
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