Copper gains on tightness, nickel rally pauses briefly

Bareksa.com - Copper rose on Friday to near two-month peaks on growing supply tightness while nickel's rally paused, although traders expected the strong advance this year to resume as Indonesia's ore export ban continues to bite.

LME copper CMCU3 was up 0.58 percent at $6,914.75 a tonne by 0935 GMT, heading for a weekly gain of nearly 1 percent, its third straight weekly rise. Prices hit the highest in 11 weeks at $6,954 on Monday.

A crunch in nearby copper supply as reflected by LME cash prices at $82.75 a tonne above the benchmark <CMCU0-3>, near the highest in two years, is helping boost copper. LME inventories have meanwhile slipped to the lowest since 2008 <MCUSTX-TOTAL>.

Also boosting the metal were surveys out on Thursday showing China's factory sector had its best performance in five months in May and U.S. factory output growth hitting its fastest pace since February 2011.

However, the HSBC Flash China Manufacturing PMI still pointed to a contraction, coming in at 49.7, keeping a lid on gains in copper. China consumes about 40 percent of the world's copper supplies.

"Three month (copper) is being pushed higher by fundamental tightness, which you can see in stocks, (but) this will be coming to an end in the second quarter as demand begins to wane," said Soeciete Generale analyst Robin Bhar.

Elsewhere, European shares edged further off last week's six-year highs with tensions high ahead of elections in Ukraine, while the dollar hit a three month top versus the euro after a soft German business sentiment survey.

A strong dollar makes dollar-priced metals costlier for non-U.S. investors.

Still, copper took support from news that South Korea's LS-Nikko Copper has been ordered to halt most operations at its No.1 plant after a brief fire broke out at the cooling tower on Thursday.

In nickel, the cash price traded at just a $2.60 a tonne discount against the benchmark contract <CMNI0-3>, moving to its narrowest in nearly 2-1/2 years as supplies of the metal grow ever tighter.

Still benchmark LME nickel traded down 0.18 percent on Friday at $19,728 a tonne as investors took profits from a powerful rally that has taken price gains in the year-to-date to nearly 42 percent.

With the nickel momentum pausing for now, traders have turned their attention to aluminium.

Chinese buying pushed LME aluminium through the 200-day moving average, triggering fresh buys. Aluminium was the strongest gainer on the LME on Friday, rising 1.35 percent to $1,821 a tonne. (Source : Reuters)