LME OPEN - Copper spikes through $9,700 as investors seek hard assets

By: Barbara Stcherbatcheff

London 31/01/2011 - Base metals advanced in London on Monday, led by copper, as traders parlayed on a surge in the Shanghai market while escalating geopolitical tensions prompted a higher demand for hard assets.

“Safe haven and alternative investments seem to be in the spotlight again as tension in Egypt, which could threaten stability around the Suez canal and the wider region, have boosted gold, oil, the dollar and the yen,” William Adams, analyst at FastMarkets, said on Monday.

Three-month LME copper traded as high as $9,703 per tonne, just shy of its record $9,781 hit earlier this month, while tin came within $40 of its all-time record of $30,400 hit on Friday.

Volumes across the rest of the complex were healthy and traders looked to cover short positions ahead of the Chinese holiday later this week.

The stronger dollar failed to deter buyers on Monday - the greenback bounced off last week’s two-month lows of 1.3730 to trade at 1.3615 against the euro, as investors poured into safe haven assets following the eruption of anti-government riots in Egypt on Friday.

Oil prices jumped on the news of the deadly protests, while other commodities such as gold also benefitted as bargain hunting combined with safe-haven buying.

In Asia, Shanghai copper - which has outperformed LME contract in January - rose to its highest since May 2007 on Monday as the market’s biggest participants sought to close positions ahead of the week-long Chinese holiday.

“News that copper inventories at the Shanghai Futures Exchange declined  is creating some optimism in  the market,” analysts at Commerzbank wrote on Monday.

The Shanghai Futures Exchange (SHFE) will close between February 2 - 8 for the New Year holiday and will temporarily raise trading margins and intraday limits for all contracts around the New Year in order to reduce trading risk.         

Today’s economic calendar is busy, with US personal spending, income and Chicago PMI all due for release in the afternoon.

Copper traded at $9,648, up $69. While aluminium traded at $2,477, up $20.

Copper prices could hit a ceiling next week on the back of rising inventories along with the Chinese New Year holidays. 

Nickel traded at $26,900, up $200.  Zinc traded at $2,342, up $41, while lead traded at $2,453, down $1. 

Tin traded at $29,750, up $150 after hitting $30,000 earlier in the session. The metal has hit fresh records every day last week on the heels of persistent worries over availability of supply in leading exporter Indonesia. 

Steel billet was indicated at $550/575. In the minors, cobalt was indicated at $38,000/41,000 while molybdenum was not indicated.