But gains may be fragile as market eyes U.S. consumer confidence data
Copper (HG-FT231.950.700.30%) rose as much as 1.7 per cent on Tuesday, rounding off a stellar first half on a surge in oil, U.S. dollar weakness and an improved economic outlook.
Copper for three-month delivery on the London Metal Exchange is up about 67 per cent in the first half, heading for its biggest half-year rise in more than two decades.
But copper is widely expected to come under pressure in coming months as markets face a seasonally quiet trading period and as a vast and supportive restocking process from China has begun to tail off as prices have risen.
“SRB purchases are almost over,” Eugen Weinberg, an analyst at Commerzbank, said of this year's hefty copper purchases from the Chinese State Reserves Bureau.
“As soon as the market realises that there are no further purchase by the SRB and that production has increased while demand has declined, the market will turn sharply.”
The metal used in power and construction was at $5,160 (U.S.) a tonne at 0919 GMT, from $5,095 at the close on Monday, having touched a session high of $5,180, its highest since June 15.
Analysts and traders widely warn that the vast gains exceed weak underlying fundamentals, as the world grapples with the aftermath of the collapse of the U.S. housing market and the credit crisis.
“There's a chance of a renewed correction in the third quarter,” said Stephen Briggs, commodity strategist at RBS Global Banking and Markets.
“We're going to clearly see lower Chinese imports in July and August.”
The dollar slipped against a basket of currencies as risk sentiment improved, with a weaker U.S. currency making metals priced in dollars cheaper for holders of other currencies.
Oil prices rose above $72 a barrel.
A recent spate of mixed data has sparked erratic moves in industrial metals prices and investors are struggling to gauge the health of the economic climate.
Underlining that the road to recovery will be long, latest data showed Japan's jobless rate rose in May to its highest in nearly six years.
By and large, however, sentiment in markets is improving.
The poor Japanese jobs numbers come a day after data showing the country's industry output rose for the third month in a row.
Investors will keep a keen eye on data this week including U.S. consumer confidence on Tuesday and U.S. June jobs and manufacturing on Thursday.
Among other industrial metals, aluminum (AL-FT0.77----%) was at $1,652 from $1,640. LME stocks of the metal used in transport and packaging hit a record high, rising 27,350 tonnes to a record high near 4.4 million tonnes.
Aluminum is 7 per cent higher in the first half.
Zinc was at $1,582 from $1,560, while battery material lead was at $1,735 from $1,703.
Tin was at $14,900 from $14,600 and nickel was at $16,000 from $15,800.
“We suspect it will be difficult for the complex to regroup and retest the old highs anytime soon,” MF Global said in a note.
“Demand remains patchy, and will likely trend lower as the summer slowdowns, particularly in Europe, set in.”
