Copper up while the dollar weakened

Copper prices in London on Wednesday climbed along with other LME base metals, supported by the weakening dollar and optimism about the prospects of the U.S. property market.

Three-month copper on the London Metal Exchange rose 1 percent to $9,437 a tonne by 0727 GMT. Copper rose 1.3 percent in the previous session, snapping a six-session run of losses.

"Perhaps the market took some solace in the U.S. housing numbers and reacted positively to it. However, it could be that it is rebounding from the day before when it got a bit carried away with S&P's threat of a U.S. sovereign credit downgrade," OSK-DMG's Chief Group Economist Thomas Lam said.

U.S. housing starts rose 7.2 percent in March to a seasonally adjusted annual rate of 549,000 units, and permits for future home construction also picked up. A typical U.S. home consumes around a fifth of a tonne of copper. [ID:nCAT005413]

Following Tuesday's strong numbers, there was a sense in the market that Wednesday's data could beat forecasts for a 2.5 percent rise in existing home sales for March.

Upcoming holidays -- with London closed for four out of the next eight trading days -- could also lead to brisk trade.

"The Easter weekend is coming up, so traders may be doubling up to clear up positions, causing base metal prices to rise in the meantime," Macquarie Bank Research Analyst Bonnie Liu said.

Copper was also supported by a weaker dollar, which dipped 0.4 percent against a basket of currencies , falling back towards a 16-month trough of 74.617 set last week.

Financial markets stumbled on Monday, sending copper to its lowest in around a month, after ratings agency S&P warned that it may downgrade the United States' AAA debt rating unless it can bring its budget deficit under control.

Shanghai's most-active copper futures contract SCFcv1 rose 1.9 percent to 71,060 yuan a tonne.

Technically, Shanghai copper could rebound into a range of 71,120 to 71,660 yuan per tonne, while LME copper could rise further to $9,488 per tonne, according to Reuters technical analyst Wang Tao.

"LME copper prices have been moving within a range of $9,000 and $10,000, only breaching that upper limit once in February before falling back quickly," Great Wall Futures Analyst Li Rong said, adding that the market may be due for an upward correction in the fourth quarter.

LME copper stocks rose 175 tonnes on Tuesday, to 451,950 tonnes, their highest since June, equivalent to a little over eight days of global supply.

In industry news, BHP Billiton reported a 19 percent jump in copper output for the March quarter, up from a year earlier when production had been disrupted by a mine accident. [ID:nL3E7FJ411]

ALUMINIUM, NICKEL RISE

LME aluminium rose 0.9 percent to $2,738, extending Tuesday's 1.5 percent rally. It touched a top of $2,741 earlier in the session, its highest since August 2008.

According to technical charts, a bullish target has been established for aluminium at $2,779 in the near term.

Earlier in the day, China ordered central and provincial authorities to stop approving the construction of new aluminium smelting capacity. [ID:nL3E7FK0JH]

China had an annual capacity of around 20 million tonnes in 2010, around 40 percent of the world's 50 million tonnes, Reuters Metal Production Database shows.

The market expects Chinese aluminium output to exceed consumption by 1 million tonnes. A concerted, effective crackdown would cut that, and if maintained, could turn the country into a net importer, with the potential to lift global prices.

Previous efforts by Beijing to rein in the sector had started to bite during late 2007 and 2008, but were relaxed during the financial crisis and in some cases replaced by incentives to expand output as China strove to maintain employment and growth.

The latest circular on the subject, however, read slightly tougher than usual, citing that individuals could be asked to take legal responsibility if state policy was not followed.

LME nickel prices rose 1.7 percent to $25,725.

"The rise in nickel prices seems to have more to do with strong physical demand than the short-term effects of the weaker dollar and better outlook for the U.S. property market. The utilisation rate in China is pretty solid, but production has also started to increase, so I don't expect prices to rally too much," said Macquarie's Liu.

Base metals prices at 0727 GMT
  Metal              Last       Change   Pct Move YTD pct chg
  LME Cu            9437.00     97.00     +1.04     -1.70
  SHFE CU FUT JUN1    71060      1340     +1.92     -1.10
  LME Alum          2738.00     24.00     +0.88     10.85
  SHFE AL FUT JUN1    16770       145     +0.87     -0.42
  HG COPPER MAY1     427.85      4.10     +1.16     -3.63
  LME Zinc          2352.00     23.00     +0.99     -4.16
  SHFE ZN FUT JUN1    17825       265     +1.51     -8.47
  LME Nickel       25725.00    425.00     +1.68      3.94
  LME Lead          2589.75     32.75     +1.28      1.56
  SHFE PB FUT SEP1    18165       185     +1.03     -1.01
  LME Tin          32734.00    334.00     +1.03     21.69
  LME/Shanghai arb    1148

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