Copper prices rose on Tuesday, lifted by a stronger euro on hopes Greece would reach agreement with its creditors to avoid a messy default, with prices on track to post their biggest monthly gain in three months.
Benchmark copper on the London Metal Exchange (LME) rose 0.7 percent at 11:57 SA time, to $8,490.25 a tonne, from a close of $8,429 on Monday.
Greek Prime Minister Lucas Papademos said negotiators had made “significant progress” on talks for a debt swap deal between the government and private bond holders, with the aim of having a definitive agreement by the end of this week.
The metal used in power and construction is headed for its biggest gain in three months, up 11 percent so far in January.
“Generally the market isn't feeling as bearish as it was at the end of last year. If you look at some of the data coming through... it has not been as bad and the market isn't as pessimistic as it was before,” said Gayle Berry, analyst at Barcap.
“That's not to say that the problems in Europe have gone away but there is a realisation that the situation is beginning to stabilise.”
Hopes of a positive outcome out of Greece's debt talks helped the euro push higher against the dollar. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.
Sentiment was also helped by an agreement between European leaders of strict new measures on sovereign budget discipline, aimed at preventing a repeat of the massive debt accumulation in some euro zone countries
“With European concerns in focus, economic data took a back seat... Commodities expected to be choppy this week with risk-on/risk-off sentiment dominating trades,” ANZ analyst said in a note.
Highlighting some concerns about the demand outlook for base metals, JPMorgan downgraded its 2012 price forecasts for the complex saying industrial metals lack the demand spark needed to ignite prices due to a stuttering global economy.
DECLINING COPPER STOCKS
Large stock withdrawals in LME-monitored warehouses helped support copper, with the latest data showing inventories monitored by the LME dropped by 2,300 tonnes to 330,825 tonnes, its lowest since September 2009.
“It is partly reflective of domestic U.S. consumption. Some of the economic data and the corporate results (from the U.S.) all point to a market where consumption is actually beginning to grow again,” Berry said.
On the technical front, copper held above its 200 day moving average, a level which it broke late last week, in a bullish price signal for the metal.
In northern Chile, workers of a union at Teck Resources Ltd's TCKb.TO mid-sized Quebrada Blanca copper mine are poised to strike after labor contract talks with the mining company broke down, a union leader said on Monday.
Chile's copper output jumped in December from a year earlier but registered a drop of 3.2 percent in 2011 from the prior year as falling ore grades, labor woes and weather problems hammered the world's top producer, the government said on Monday.
Aluminium climbed to $2,297.50 a tonne from a close of $2,279 a tonne on Monday.
Zinc, used in galvanising, rose to $2,144.75 from a close of $2,124, while tin climbed to $24,200 from $23,975.
Battery material lead rose to $2,296.50 from $2,265 and stainless steel ingredient nickel was at $21,400 from $21,305.
“Our feeling is that the nickel price now looks to have neared a peak as Chinese import demand eases and the risks of a correction in the short run are growing, despite a non-Chinese demand recovery,” Macquarie analysts said in a note. - Reuters