Copper rose more than 1 percent on Thursday as investor confidence improved on hopes Greece would complete a debt swap and with a weaker dollar also supporting base metals; concerns however lingered over slack demand in top consumer China.
Benchmark copper on the London Metal Exchange was at $8,425 a tonne by 12:10 SA time, up 1.6 percent from a close of $8,295 on Wednesday.
Investors welcomed news that major banks and pension funds threw their weight behind Greece's bond swap offer to private creditors, making it increasingly likely that the deal will pass and clear the way for a bailout package to avert an immediate default on its debt.
“It looks like sentiment has improved because of Greece, because people think more investors are taking part in the debt swap and this could help the country to solve part of its problems,” said Commerzbank analyst Daniel Briesemann.
“Also the slightly weaker dollar and news out of Chile are helping metals.”
The euro inched up against the dollar as Greece's debt restructuring efforts looked to have made some progress.
A weaker US currency makes it cheaper for holders of other currencies to buy dollar-priced commodities such as base metals.
In industry news, Marcelo Awad, the veteran boss of Chilean copper miner Antofagasta Plc, resigned on Wednesday, surprising investors with his abrupt departure.
“Probably his exit is partially due to the difficulties and delays ramping up mining output. This points to the fact that it's hard for miners to increase production, which is particularly evident in copper,” Briesemann said.
Emphasising supply tightness, the world's top copper producer, Chile's Codelco, said this week it sees output dipping slightly.
Also, Freeport-McMoRan Copper & Gold Inc said late on Wednesday sales and deliveries of concentrate will continue to be impacted until the company is able to return to normal production levels.
Grasberg mine operations were suspended by Freeport on February 23 because of work disruptions following a strike.
MIXED SIGNALS
Copper prices have risen as much as 15 percent since the beginning of the year after a 23 percent fall in 2011.
The run-up however lost some steam and prices fell in the last couple of weeks on worries over lower demand from China, which increased after the country cut its growth target for 2012.
China consumes about 40 percent of global copper supply.
“While the reduced growth target for the Chinese economy continued to weigh, we would note that metals specific news flow came in supportive,” Credit Suisse said in a note.
“For instance, inventories at the London Metal Exchange registered renewed outflows across most metals, suggesting physical demand to be firm.”
Inventories of copper in warehouses monitored by the LME fell by 875 to 280,025 tonnes, a fresh 2-1/2 year low, latest data showed.
This points to improving demand in Europe and the US but rising stocks in warehouses monitored by the Shanghai Futures Exchange show a weaker demand pattern in Asia, analysts said.
For more hints on the state of the global economy investors will focus on US non-farm payroll jobs figures on Friday.
Data on Wednesday showing the pace of private job creation in the world's largest economy picked up in February supported market sentiment and suggested Friday's figure might be stronger than previously expected.
In other metals, tin was at $22,800 from $22,250 while zinc, used in galvanising was at $2,042.50 from $2,015 Wednesday's close.
Battery material lead was at $2,130.25 from $2,090 and aluminium was at $2,232.25 from $2,209.
Nickel was at $19,200 from $18,900. - Reuters