Copper firmed on Friday on an improved outlook in the United States, the world's biggest economy, though gains were held back by concerns about demand in top copper consumer China, where stocks continue to rise.
Copper stocks at warehouses monitored by the Shanghai Futures Exchange rose for a third consecutive week to 227,276 tonnes by March 15, the highest level since July 2002, data showed.
Three-month copper on the London Metal Exchange edged up 0.24 percent to $8,588.75 a tonne by 13:51 SA time from $8,565 a tonne on Thursday. The metal has zigzagged in a range of $8,400 to $8,600 this week but is headed for a weekly gain of 1 percent.
Optimism stemming from upbeat US job and manufacturing data on Thursday drove the S&P 500 share index to its highest since the 2008 financial crisis and pushed London copper up more than 1 percent.
“The US data has been above expectations, and today the signs are that real Chinese demand has been by China standards on the weak side,” said BNP Paribas analyst Stephen Briggs.
“We have to have a breather. I'm reasonably bullish on a six- to 15-month view, but we've had some big gains this quarter, (which) must be partly in anticipation of stronger demand later this year.”
In contrast to Shanghai's continuously growing copper stocks, LME stocks fell every day since February 22 to 267,750 tonnes by March 14, the lowest since June 2009.
The prompt-to-three-month spread on LME copper closed at a backwardation of $17.75 a tonne on Thursday, a level not seen since the end of February, suggesting tightness in the physical market.
“A forward curve in backwardation generally points to a tightening market. Although it might be too early to predict detailed numbers, we are likely to see a much higher supply deficit this year than many players currently think,” said Commerzbank analyst Daniel Briesemann.
TIGHT SUPPLY
LME copper has risen more than 12 percent so far this year, benefiting from a brightened global economic outlook and increased liquidity across markets as central banks around the world ease credit curbs to spur growth.
The gains have come despite a shaky outlook on demand from China, and doubt is creeping in as to how much further prices can rally without a significant improvement in demand from a country that consumes 40 percent of the world's copper.
Knocking confidence, premier Wen Jiabao said on Wednesday China must embrace lower growth and bolder political reform to keep its economy from faltering and dampened hopes for any near-term relaxation of curbs in the property sector.
“Consumption in March is better than January and February, but the pace of recovery is not even close to the same period in past years,” said a Shanghai-based trader.
“April will see further improvement, but the question is how significant it will be.”
Elsewhere, copper supply remained constrained.
Freeport McMoran Copper & Gold Inc said first-quarter copper output would be down by about 10 percent because of labour-related problems at its Grasberg mine in Indonesia, the world's second-biggest copper mine, which will not return to full production until the second quarter.
Technical analysis suggested that signals have turned neutral for LME copper for the day, said Reuters market analyst Wang Tao.
In other metals traded, packaging metal aluminium rose 0.42 percent to $2,260.50 a tonne from $2,251.
Some Chinese manufacturers consumed more primary aluminium in the year to March to meet higher domestic demand, but sources said this gain was likely to be short-lived unless the building sector picks up and exports improve.
Soldering metal tin rose 0.53 percent to $23,800 a tonne from $23,675, zinc dipped 0.04 percent to $2,089.25 from $2,090, battery
material lead rose 0.24 percent to $2,125 from $2,120, while stainless-steel ingredient nickel fell 0.73 percent to $19,234 from $19,375.
Weighing on nickel, data out earlier from the Lisbon-based International Nickel Study Group (INSG) showed the global nickel market was in a supply surplus by 17,000 tonnes last year. - Reuters