Copper rose to its highest level in three weeks on Monday, as talk of further monetary easing in the United States and growing perceptions of an undersupplied physical market underscored the metal's tightening fundamental balance.
Copper has risen for six straight sessions, moving ever closer to recent peaks near $9,000 per tonne in London and above $4.08 per lb in New York, as the prospect of a hefty production deficit in 2011 continued to bolster the industrial metal's demand-driven appeal.
That demand outlook grew brighter after Federal Reserve Chairman Ben Bernanke said on Sunday the Fed may buy more than the $600-billion in U.S. government bonds it has committed to purchase, if the economy failed to respond.
"You're facing a lot of demand for copper right now, and the Fed is supporting this market right now," said Jeff Pritchard, analyst and broker with Altavest Worldwide Trading in Mission Viejo, California.
On the London Metal Exchange (LME), three-month copper ended at $8,770 a tonne, up from Friday's last quote of $8,725/8,730 a tonne, and well within reach of its record high of $8,966 hit on Nov. 11.
COMEX copper for March delivery crossed the $4 threshold for the second straight session, ending up 0.90 cent at $4.0080 per lb.
Despite the Fed's supportive stance, worries about the potential spread of debt problems in the euro zone held the upside momentum in check on Monday.
The euro fell versus the dollar, as traders took profits from a three-day rally on signs of division over how to contain the euro zone's fiscal crisis. The euro zone should have a bigger rescue fund for member states in trouble, and the European Central Bank should boost its bond buying to prevent the sovereign debt crisis from derailing economic recovery, an International Monetary Fund report obtained by Reuters said. "If there is a unified stance emerging out of the finance ministers meeting, we would not be surprised to see dollar weakness resume and push metals up one more time," said MF Global analyst Ed Meir in a research note.
EYES ON STOCKPILES
Market attention continued its focus on LME stockpiles, where data since mid-November has shown one party holding between 50 and 80 per cent of the inventory - a situation not unusual for large companies with many divisions and clients that delve into metals markets. British newspaper The Telegraph reported the buyer of the material was JP Morgan. Bart Melek, global commodity strategist with BMO Nesbitt Burns, Toronto, said the sizable position was likely linked to a potential launch of a physically-backed copper exchange-traded product.
"If that is the case, when these products get approved or hit the market much of that metal will go off-warrant and we could quite easily see much lower LME inventories," he said.
The premium for cash copper remains at $46.50 a tonne although it has eased since Dec. 1 when it settled at $63.5 a tonne, its highest in just over two years.
In general stocks of copper at LME warehouses have declined since February, indicating a pick-up in demand and against a backdrop of tight supply. The latest data showed stocks fell 1,250 tonnes to 352,375 tonnes, on their way to the biggest annual decline in six years. In other metals, nickel ended up $100 at $23,600 a tonne.
On the supply side, the world's top nickel producer, Russia's Norilsk Nickel has said it will restart its idled Australian unit Lake Johnston, which mines sulphide ore and produces nickel concentrate. The plant was mothballed in 2009 as the global financial crisis cut demand for metals. In 2008 the enterprise produced 8,900 tonnes of nickel in concentrate.