LONDON — Copper hit a nine-month high on Monday on a weaker U.S. dollar and improving economic sentiment, while analysts speculated global demand for industrial metals could start gaining pace later this year.

Due to problems with the feed from the London Metal Exchange price data has been gathered from metals traders.

Copper for three-months delivery on the LME was at around $5,430 (U.S.) a tonne, traders said, from a close of $5,310 on Friday. Traders said the metal used in power and construction earlier hit a high of $5,464.75, its highest since mid-October.

“The market is becoming more positive about the economic outlook and about the outlook for base metals demand,” said Gayle Berry, an analyst at Barclays Capital.

Investors are gaining confidence in the prospect of economic recovery as data, though still mixed, is gradually improving. A recent slew of upbeat U.S. earnings has also cheered investors.

Underlining a brighter mood, European shares rallied following a last-minute $3-billion rescue of U.S. CIT Group.

Also supporting sentiment, second-quarter U.S. gross domestic product figures are likely to be better than the first quarter, White House budget director Peter Orszag said on Sunday.

A survey of economists suggested the U.S. recession was easing but had probably not yet ended.

A weaker U.S. dollar also supported prices, making dollar-priced metals cheaper for holders of other currencies.

Stocks of copper rose 1,800 tonnes to 265,950 tonnes. Inventories have been trending downwards in 2009 due to supportive buying from China, but have ticked higher in recent days as an aggressive buying exercise from the world's top copper consumer has faltered.

But copper prices have remained resilient during the traditionally quiet summer season and some analysts believe underlying demand from China remains sturdy.

“The market had been expecting the summer lull to result in higher LME inventories and a pull-back in Chinese buying, whereas what we're seeing is relatively mixed inventory trends and still very robust Chinese demand,” Ms. Berry said.

Concerns about nearby supplies have arisen because LME data for some days now has shown a dominant position controlling between 50 per cent and 80 per cent of LME stocks.

The worry is reflected in the premium or backwardation of about $10.5 a tonne for LME cash copper, according to latest data, over the three-month contract. This compares to a contango of $14.50 on July 8.

“Higher LME inventories and – China excepted – a fragile global economy, should limit the extent of the backwardation,” said Leon Westgate, an analyst at Standard Bank.

Aluminum was at around $1,740, traders said, from $1,708. Stocks of the metal used in transport and packaging rose 6,950 tonnes to a record above 4.52 million tonnes. Showing demand is still alive, cancelled warrants of aluminium – material earmarked for delivery – rose to 152,500 tonnes from 138,100 on July 15.

Traders said zinc was at around $1,660 from $1,619, battery material lead was at about $$1,720 from $1,670. Traders said tin traded at around $13,600 from $13,240 and nickel was at about $16,335 from $16,125.

Courtesy of The Globe and Mail