Copper rose by about 2 percent to hit its highest in almost three months on Tuesday as better-than-expected growth data
from top metal consumer China lifted financial markets, boosted the euro and eased worries over weakening metals demand.
Benchmark copper on the London Metal Exchange was at $8,244 by 1040 GMT, a 1.9 percent rise from a close of $8,089 on Monday.
Earlier it hit a session high of $8,262 a tonne, its highest since the end of October.
The Chinese economy grew by 8.9 percent in the fourth quarter 2011 compared with the same period one year earlier, beating a forecast of 8.7 percent expansion by economists polled by Reuters, although growth was at the slowest pace in 2-1/2 years.
China accounts for about 40 percent of global copper consumption.
“Today's pick up was on the back of the Chinese data; obviously China is a key market for metals and whatever happens there has a big impact but this is backward looking data, the market shouldn't get overexcited about it,” said Citigroup analyst David Wilson.
“Chinese traders show reluctance to buy copper when there is a '8' in front of its price. It's fairly obvious that China has been restocking since September attracted by lower prices but now the question is: are we going to see more restocking or are consumers already sitting on reasonable volumes?”
Some players think that China will implement some monetary easing measures in the next future taking into account the fact that China's inflation rate eased to a 15-month low in December.
“Our economists expect the reserve requirement ratio already to be cut in the near future,” said Commerzbank in a research note. “This is giving considerable buoyancy to metal prices this morning.”
A weaker dollar against the euro also supported industrial metals.
The euro rose for the first time in three trading sessions while financial markets advanced as the Chinese data gave risk sentiment a shot in the arm.
A weaker US unit makes dollar-priced commodities more affordable for holders of other currencies.
RECORD ALUMINIUM STOCKS
Also underpinning copper prices are falling inventories of the red metals in LME-monitored warehouses, which point to improving demand.
Copper stocks fell 1,150 tonnes to 353,425 tonnes, their lowest in more than 13 months.
Stockpiles of aluminium held in LME on the other hand, hit a record above 5 million tonnes.
The build up was due to large shipments into the Dutch port of Vlissingen, and also Detroit in the United States, and came as the LME's January contract rolled over. The LME allows physical settlement of contracts.
In November, traders said large inflows were expected over the end of 2011 as a souring economic outlook curbed demand and a European dollar crunch intensified the need for cash. Metal is sometimes delivered into LME warehouses because the cheaper finance can be secured against it.
Aluminium was at $2,216 a tonne from $2,161.
Last week aluminium prices were boosted by production cuts announced by US aluminium producer Alcoa and Norwegian producer Norsk Hydro.
Some analysts say the price increase was a bit overdone as the announced production curtailment is not high enough to offset heavy oversupply, high stocks and the new capacity planned.
“These cuts are a drop in the ocean compared with the new capacity that producers are bringing on stream,” Wilson said.
Tin was at $21,700 from $20,850 while zinc, used to galvanize steel was at $2,011.75 from $1,961 Monday's close.
Battery material lead was at $2,078 from $2,030 an nickel was at $19,579 from $19,425. - Reuters