Copper climbed over 3 percent on Friday, lifting other industrial metals on the back of a weaker dollar and rising equity markets but analysts said doubts over real demand could cap further gains.
Copper for three-months delivery on the London Metal Exchange rose to $4,590 a tonne in the open outcry trade, versus $4,469 a tonne on Thursday, when it tumbled as much as 4 percent.
"It's tracking equities and the weaker dollar," said analyst Carl Firman at Virtual Metals.
The dollar fell, hitting its lowest in five months against a basket of currencies as concerns about the U.S. sovereign rating accelerated a recent drive to move away from the greenback. FRX/
European shares edged higher, with miners such as BHP Billiton and Rio Tinto extending their gains up to 4 percent.
"A lot will depend on the dollar," an LME trader said, "If it does continue to weaken we will most likely see copper testing the resistance at $4,670 a tonne."
The metal, used extensively in construction, has gained some 50 percent since the start of the year, buoyed by continuous falls in inventories and Chinese buying.
TOO UNCERTAIN
However, most of the analysts believe the Chinese buying was driven by arbitrage between Shanghai and London prices, rather than a real recovery in the demand from the world's largest copper consumer, which could put a brake on the rally.
"Copper stocks have gone into restocking but we don't really know and it is too uncertain to put it down to real demand," Firman at Virtual Metal said.
LME copper inventories fell to 333,375 tonnes, their lowest level since the end of December. But the ratio of cancelled warrants, or material earmarked for delivery, has fallen to 16 percent, from 20 percent a week earlier.
China's refined copper imports hit a fresh record high of 317,947 tonnes in April, after higher Chinese prices opened up arbitrage trade last month, supported by tight supply of scrap and stockpiling by both the government and some end-users.
"In terms of fundamentals, China is looking weak, but the markets abroad face a lot of uncertainties in the short term due to high correlation with oil, equity and foreign currency markets," said a Shanghai-based trader.
Primary aluminium imports in April surged to a record 362,400 tonnes, taking many by surprise and weighing on the the three-months price, which bucked the trend and edged down by $11 to $1,441.
"Such huge imports of primary aluminium were really shocking. This, coupled with restarted capacity by smelters, will have a big impact on domestic market," said Liang Zhigang, an analyst at Minmetals StarFutures, who expected Chinese aluminium prices to fall below 12,000 yuan per tonne soon.
"The April imports are equal to an additional supply enough for a week of China's consumption."
Price of steel material zinc jumped to $1,492 from $1,443 a tonne while nickel was at $12,645 a tonne versus Thursday's $12,125. Battery material lead rose to $1,425/1,426 a tonne from $1,390.
Tin traded at $13,700/13,750 from $13,200 on Thursday.
