NEW YORK/LONDON, May 24 (Reuters) - Copper prices rallied to their loftiest level in more than a week on Monday as investors shifted their focus to strong economic and demand growth in China, the world's top consumer of industrial metals.
Copper for July delivery HGN0 on the New York Mercantile Exchange's COMEX division shot up 8.65 cents, or 2.8 percent, to end at $3.1475 per lb, its highest level on a settlement basis since May 13.
On the London Metal Exchange, benchmark copper CMCU3 peaked at $6,935.25 a tonne, its highest level since May 14, before ending at $6,910 a tonne in official rings, down from $6,845 at the close on Friday.
China accounts for more than 30 percent of global copper demand, estimated at around 19 million tonnes in 2010. Economic policy tightening in the country, alongside worries about sovereign debt default in Europe, have hit metal prices in recent weeks.
But those concerns were on hold Monday, after comments by a state planning official in China that the country should be particularly cautious in introducing new tightening measures.
"With China now taking a more cautious stance on monetary tightening and the U.S. economy still on the road to recovery, demand for copper and other industrial metals appears set for continued growth (and higher prices)," RBC Capital Markets said
in a daily market commentary.
Sentiment was also boosted by local media reports that a Chinese property tax would not be implemented for at least three years, although the report was later denied.
"I think people have been vastly over-estimating the probable decline in China for copper, and base metals in general," said Bill O'Neill, managing partner with LOGIC Advisors.
"Their domestic economy seems to be still doing very, very well, and that will continue to keep the market well bid."
Still, some traders cited Chinese copper imports as a reason to be cautious. April refined copper imports fell 8.1 percent from March, when the monthly rise was 52.9 percent.
VERY, VERY DISTANT
Worries about Chinese demand and the financial market turmoil triggered by ballooning government deficits in euro zone countries such as Greece have been behind the more than 10 percent drop in copper prices since the middle of April.
Copper prices last week fell to $6,415 a tonne in London and $2.9005 per lb in New York, their lowest levels since early February.
"The sell-off last week was overdone," David Wilson, analyst at Societe Generale, said. "If you look at the impact Europe has on metals demand, it comes a very, very distant third to China and the U.S."
Markets are carefully watching economic developments in the United States, the world's largest economy. Data on Monday showed sales of previously owned homes touched a five-month high in April.
Also on the radar are stocks of industrial metals in LME warehouses, which have been falling for copper, aluminum, tin and nickel and helping to buoy sentiment.
Zinc CMZN3 was at $1,930 a tonne, up from $1,894 on Friday, with lead CMPB3 at $1,830, up from $1,811, tin CMSN3 at $17,725, up from $17,600. Stainless ingredient nickel CMNI3 was at $22,200, up from $21,350 and aluminum was at $2,085, up from $2,055.