BASE METALS: Copper Ends Up 3.2% As Metals Follow Euro, Equities Higher

Oct 12, 2011 LONDON (Dow Jones) -- Base metals closed firmly higher on the London Metal Exchange Wednesday, boosted by expectations of a plan to recapitalize Europe's ailing banks.

LME three-month copper ended PM kerb trading at $7,525 a metric ton, up 3.2% on Tuesday's afternoon close, while three-month lead ended 4.3% higher at $2,070/ton.

The mood turned optimistic across world financial markets after European Commission President Jose Manuel Barroso delivered what he described as a comprehensive "road map" to addressing the euro zone's sovereign debt crisis--including a call for a "fully coordinated" plan to strengthen Europe's banks.

He told the European parliament that the region's banks must be recapitalized soon through private and state injections. Banks must also provide full transparency on their sovereign debt holdings, he said.

The news helped spur the euro to its highest level against the greenback since Sept. 16--a positive for the metals, which are denominated in U.S. dollars.

In addition to a more positive take on Europe, investor sentiment was buoyed by speculation of restocking in China, analysts said.

"Declining inventories in Asia suggested that demand continues to remain strong despite the inflationary pressures currently playing out in emerging markets," said CMC markets analyst Michael Hewson.

Standard Bank analyst Leon Westgate noted copper inventories have started to decline rapidly in LME warehouses in Asia and bonded warehouses in Shanghai, where he said anecdotal reports suggest bonded stocks are now less than 200,000 tons.

"With some reports suggesting physical premiums in Shanghai are now being quoted up around the $150/ton mark, the signs are that, in spite of the rather lackluster Shanghai Futures Exchange-LME arbitrage, there has been decent restocking activity," he said in a report.

Import data is now being eagerly awaited from China, which will officially release its preliminary customs data for September Thursday.

While China's commodity imports are likely to show a slight deceleration in volume compared with a month earlier, analysts expect any fall in copper imports will not be sharp.

Prices in dollar a metric ton.
3 Months Metal                Bid-Ask       Change from
                                          Tuesday PM kerb
Copper                     7525.0-7526.0      Up 235
Lead                       2070.0-2075.0      Up 85
Zinc                       1945.0-1946.0      Up 33
Aluminum                   2248.0-2249.0      Up 17
Nickel                    19075.0-19080.0     Up 225
Tin                       23000.0-23050.0     Up 625
Aluminum Alloy             2180.0-2200.0      Unchanged
Aluminum Alloy-NASAAC      2300.0-2310.0      Up 20