LONDON -- Copper jumped to a three-month high on Thursday on rising demand and supply shortages, with nickel setting record highs and zinc up nearly 5 percent.
Copper futures for three-month delivery hit $6,489 a tonne on the London Metal Exchange, their highest since the middle of December, and ended the official trading session at $6,435, up from Wednesday's close of $6,220.
"All the fund money that got out of stocks has come back to comodities," said a trader on the LME floor.
"Metals held their ground over the past days, but the funds coming in has driven the prices up aggresively today."
Base metals prices have held firm despite recent sharp declines in major equity markets on worries about the U.S. economy weakening.
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Analysts think the market is watching low physical metal stocks and tight supplies.
Generally higher base metals prices helped boost shares of London-listed miners on Thursday such as BHP Billiton , Anglo American and Xstrata , which all rose between two and four percent. "LME prices have broken their correlation with equity market movements," Numis Securities analyst John Meyer said.
"Demand for metals appears to remain remarkably strong given the potential for slower growth in the U.S."
Stocks in LME warehouses fell 1,625 tonnes to 196,125.
Backwardation — the premium for cash metal over the three-month future — in copper rose to $70, its highest since last July.
"Copper backwardation rose, due to short covering by funds which was unexpected by the market and that's why the backwardation rose that quickly," the LME trader said.
SUPPLY TENSION
Nickel futures for three months delivery hit a new record high at $46,300 and were last at $46,185/46,190.
"Nickel made a new high on each day of this week. Inventories at the LME increased further and new supply, which could ease the tensions, is not on the horizon," Dresdner Kleinwort said in a research note.
Nickel stocks in LME registered warehouses fell 222 tonnes to 3,594, of which only 2,466, or less than one day's global consumption, are on warrant and so available to the market.
Tin for three-months delivery firmed around 2 percent to $13,750/13,755 against Wednesday's close of $13,500.
Another LME trader said problems in Indonesia and tight market conditions continued to support tin.
"This level is the top end of resistance. We might see $15,000 a tonne in the coming weeks," he said.
Dozens of small-scale smelters ceased operations on Indonesia's tin-producing Bangka island last October after a crackdown on illegal smelting and mining that has damaged the environment, raising fears of supply disruption.
Indonesia has allowed five smelters to resume operations and may issue permits for another two but it is unclear when they will start.
Zinc touched a session high of $3,375, rising around 5 percent from Wednesday's close of $3,220, and ended the session at $3,290/3,292.
Aluminium rose to $2,767 against Wednesday's close of $2,715 a tonne while lead was last quoted at $1,908/1,909 from $1,870.
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