Copper gains as dollar dips
REBEKAH CURTIS
RTGAM


LONDON - Copper rose more than 3 per cent on Thursday, lifting other industrial metals as a dip in the dollar bolstered prices.


But analysts warned gains looked fragile as stockpiles climbed again and a grim global economic picture stoked demand concerns.


Copper for three months delivery on the London Metal Exchange rose as high as $3,349 (U.S.) a tonne and was at $3,325 in open outcry trade, versus Wednesday's $3,235 a tonne.


The dollar fell a day after hitting a six-week high against the yen and a three-month peak versus the euro, with a weaker U.S. currency making industrial metals cheaper for local currency holders.


"I'm surprised copper has been doing as well as it has been, but there's the weaker dollar and the continued potential for Chinese demand," Marc Elliott, an analyst at Fairfax, said.


Stockpiles of copper resumed a rise on Thursday, up 2,950 tonnes at London Metal Exchange warehouses, after their first big fall since October on Wednesday.


Reflecting still-high inventories, the global copper market saw a surplus of 329,000 tonnes in 2008, the World Bureau of Metal Statistics said on Wednesday. That figure compared with a 119,000-tonne deficit in 2007.


"The dollar's moved down that's probably why metals are taking a little bit of a rally now," a trader said, adding that gains could be limited.


"Just because we're seeing a little bit of a rise in metals due to the forex market..(does not mean) we're going to see any kind of extended rally today."


Aluminum for three-month delivery rose to $1,350, after sinking to a six-year low of $1,314 a tonne on Wednesday when LME inventories soared and further turmoil in the auto industry reinforced demand concerns.


Aluminum stocks, which rose 30,850 tonnes on Thursday, jumped to a record 3.11 million tonnes in LME warehouses.


Traders and analysts in China eyed a bidding meeting held by the state reserves body due on Friday to buy the light metal from large aluminum smelters, which could see a consolidation in domestic spot prices and prevent futures prices from falling further.


The next round of buying by the SRB will support a profitable arbitrage ratio for aluminum imports into China, Macquarie Bank said in a note on Wednesday, but some analysts say the huge stock overhang will continue to drag on the market.


On an otherwise quiet economic agenda, U.S. weekly jobless claims and U.S. producer prices for January are both due at 1330 GMT.


With employment, housing and credit conditions in the United States showing no signs of turning around, the Federal Reserve forecast the world's largest economy would shrink by between 0.5 per cent and 1.3 per cent this year.


The U.S. recession looks poised to last at least a few months longer, which would make it the longest downturn since the Great Depression, a top White House adviser said on Wednesday.


In company news, French nickel and manganese group Eramet said it would slash planned spending for this year as it sees market conditions remaining "very difficult" in the early part of 2009.


The company plans to cut its annual nickel production to 50,000 tonnes this year, down from 51,000 in 2008, which was already 14 per cent lower than in 2007.


Key stainless steel ingredient nickel rose to $9,950/10,000 from $9,700, Zinc climbed to $1,135 from Wednesday's $1,121 a tonne and lead rose to $1,094/1,095 from $1,067.


Tin rose to $10,785 from $10,775.