Copper hits fresh 16-year high on LME

The weak dollar against the euro added fuel to the rally, making LME contracts more attractive to non-dollar denominated users. The euro rose to a five-week high of $1.3246.

Copper reached a high of $3,260 per ton during the morning ring but trade and hedge selling capped gains with prices dropping back to $3,213 per ton in the afternoon.

Renewed fund interest before the kerb propped values back up, with funds seeking to engineer a strong close, drawing in commodity advisory traded funds into the rally.

Copper is likely to reach all-time highs amid fund, CTA buying and the weak dollar, but the current rally isn't quite justified by fundamentals, analysts said.

"There is a delinkage between the LME and the physical market with physical dealers reporting softening premiums and greater availability of copper cathodes," an analyst said.

Three-month aluminum was strong throughout the day, dipping in the afternoon in line with copper, but fund buying just before the close propelled prices just shy of December 31 highs of $1,973.50 per ton. Aluminum stood at $1,969 per ton in after-hours trade.

Nickel performed less strongly than expected yesterday given accelerating LME stock falls within reach of the critical 10,000-ton level. The cash-to-three-month backwardation widened out to $200 per ton, from just $55 per ton last week, indicating tightness for prompt delivery dates, which makes the market prone to price spikes.

"Fund buying was strong on nickel first thing with prices up at $16,000 per ton, but trade and producer selling was capping the highs," an analyst said.

LME three-month zinc boasts the strongest fundamentals of the LME complex, analysts said, which should put in a better position than copper, should the fund-driven rally peter out, analysts said.

Umicore's announcement to cut refined zinc output by 130,000 tons had no impact since the resulting surplus concentrate will be treated elsewhere amid the current concentrate shortage.

Zinc prices reached a fresh high 7-1/2 year high of $1,397 per ton.