Copper soars to record high

11th November 2010, Comments 0 comments

Copper soared to a record high on Thursday on the back of supportive Chinese economic data, tight global supplies and an ongoing strike in key producer Chile, dealers said.

In early trade on the London Metal Exchange, copper for delivery in three months' time hit 8,966 dollars per tonne, beating the previous high of 8,940 dollars seen in July 2008.

"Copper briefly hit a new all-time high this morning," said Commerzbank analyst Carsten Fritsch.

"Prices are being supported by firm Asian markets and robust economic data from China (industrial production, fixed assets investments) which were largely in line with expectations and indicate continued high activity in China."

The industrial metal, which is used in plumbing, heating, electrical and telecommunications wiring, has rocketed by around 50 percent since June, boosted also by the weak dollar and strikes in key producer Chile.

"A strike at the Collahuasi mine (in Chile) has highlighted the fragility of the supply-side and has stoked concerns of a looming market deficit at a time of falling inventories," said analyst Robin Bhar at Credit Agricole CIB.

Collahuasi, in northern Chile, is the third biggest copper mine in the world and produces an estimated three percent of global supplies.

Investors also flocked to copper on Thursday as they sought to safeguard their cash amid news of a sharp spike in Chinese inflation.

China said Thursday that consumer prices rose at their fastest pace in more than two years in October, raising expectations of another interest rate hike as Beijing admits it may miss its 2010 inflation target.

The consumer price index -- or CPI, a key measure of inflation -- rose 4.4 percent year-on-year last month, compared with 3.6 percent in September.

Copper has also won strong support in recent days from the weak dollar, following the US Federal Reserve's decision last week to launch a second wave of asset-buying or quantitative easing, known as QE2.

"The market had already been on a charge with the raft of bullish developments, such as QE2, but in the last couple of days, China has been the driving factor," said head dealer Rajesh Patel at trading firm Spread Co.

"Chinese CPI data jumped to two-year highs this week, sending copper prices higher and sparked a short-covering rally which added fuel to the fire.

"Added to this was the release of a bullish note on copper by Bank of America Merrill Lynch on Thursday."

© 2010 AFP

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