Virtual Metals Group

Media/Press

Copper ends up as Dubai bailout boosts sentiment

NEW YORK/LONDON, 14th December 2009 (Reuters) By Chris Kelly and Maytaal Angel

Copper prices ended higher, after a $US10 billion ($A10.90 billion) bailout for debt-laden Dubai bolstered broader market sentiment and pressured the dollar, making dollar-priced metals a more attractive buy for non-US investors.

At the New York Mercantile Exchange's COMEX division, benchmark copper for March delivery ended up 1.90 cents at $US3.1520 a lb, after dealing in a session range between $US3.1105 and $US3.1640.

Copper for three-months delivery on the London Metal Exchange (LME) closed up $US78 at $US6,913 a tonne.

Pat Donnelly, senior broker with Olympus Futures in Chicago, said renewed weakness in the US dollar provided a good bounce for commodities at the start of the week.

"We seem to be reflating a bit again," he said.

The dollar slipped after a decision by Abu Dhabi to bail out fellow UAE member Dubai on Monday with a $US10 billion lifeline eased fears of a potential debt default that had recently rattled markets and slowed safe-haven buying that lifted the US currency last week.

"The rally in commodities has largely been a function of the dollar weakness," an, analyst at Virtual Metals, Carl Firman said. "Also, expectations are for continued signs of growth in OECD economies. China's demand for metals seems to be healthy."

On Friday, strong Chinese data helped reinforce hopes that the Asian giant will continue strong buying next year.

China's industrial output surged in November at its fastest pace since June 2007, while imports of unwrought copper and semi-finished products rose 10.3 per cent in November from October.

Copper prices have more than doubled this year on a weak dollar, increased fund flows, improved economic data and record import buying from top metals consumer China.

But LME stocks of copper continue to rise, indicating demand outside China remains weak. Latest data showed copper stocks rose 1,075 tonnes to 467,150, the highest since April.

Aluminium surges

Aluminum, used in transport and packaging, ended the day at $US2,260 a tonne, from $US2,275, having earlier hit $US2,305, its highest since mid-October 2008 year.

Canceled warrants of aluminium - material earmarked for delivery and therefore not available to the market - have risen to 193,525 tonnes, equal to 4.2 per cent of the total inventories, which Barclays Capital said was the highest figure since June 2008.

Aluminum stocks hit a record high of 4.6 million tonnes in September, before easing to around 4.59 million tonnes recently. Much of the stock is tied up in financing deals, which is causing shortages in various regions.

"It looks like prices could head to $US2,350 a tonne next. The high level of LME inventories does not seem to be much of a drag, as much of the metal is apparently tied up in financing deals," Edward Meir, analyst at MF Global, said in a research note.

Investors are also piling into the metal as its gains have been relatively subdued this year, while commodity trading advisors (CTAs) -- funds that follow trends in futures markets - are unwinding bets on price falls in aluminium, traders say.

Zinc was at $US2,334 from $US2,298, while battery material lead traded at $US2,339.5 from $US2,301. Tin was $US100 higher at $US15,300 a tonne from Friday's $US15,200, while stainless-steel ingredient nickel traded at $US16,900 from $US16,650.

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