Copper Nears 5-Month High On China Demand Hopes

Feb 08, 2012 NEW YORK (Dow Jones)--Copper futures ticked higher on Wednesday, settling at the highest price in almost five months as hopes for an uptick in demand, particularly from top consumer China, outweighed the drag from euro-zone debt concerns as Greek debt talks continued.

The most actively traded copper contract, for March delivery, rose 3.35 cents, or 0.9%, to settle at $3.9095 a pound on the Comex division of the New York Mercantile Exchange, the highest ending price since Sept. 16.

U.S. equities and other growth sensitive assets were under pressure on Wednesday on concerns over a slow-moving Greek restructuring deal designed to keep the country from defaulting on its debt.

But copper bucked the trend, as investors bet that global economic growth this year would support demand in for the metal from industries such as electric utilities, appliance makers and construction.

"There's no real fear in the market right now," said Adam Klopfenstein, a market strategist with Archer Financial Services. "This year we're starting to see a lot of better economic numbers from the U.S., and some elsewhere in the world."

Investors on Wednesday bet that despite the slow pace of progress in Greece, the country wasn't heading toward a default that could slam the global economy.

Underlying copper's rally so far this year has been the belief by some investors that growth in China, by far the world's largest copper consuming country, will hold up well this year. Futures gained 13% in 2012 through Wednesday's close.

Copper is "finding support from reduced fears that the real estate market in China will implode and drag the country's entire economy down with it," analysts with Commerzbank said in a note. "China has sufficient fiscal and monetary policy capacity to prevent a significant cool-down" in growth.

China's central bank on Wednesday signalled support for the government's program to build affordable housing, a development seen lifting future demand for copper there in plumbing and electrical wiring. The country accounts for about 40% of world copper demand.

Traders are also looking ahead to a pair of readings on China's economy set for release later this week.

On Thursday, China releases its official inflation data for January. Moderating inflation in recent months has supported raw material prices by bolstering the view that Beijing has the monetary policy flexibility to prevent a growth slowdown.

Friday brings Chinese trade data for January. Copper prices shot higher last month after record Chinese copper imports in December surprised market players, but many market participants expect imports to have slowed last month.