Copper (HG-FT) hit a two-week high on Friday in a rally that encompassed equity markets, but concerns about economic growth and demand in the second half of the year were expected to cap gains.

Benchmark copper on the London Metal Exchange hit $7,033 (U.S.) a tonne, its highest since May 14. The metal used in power and construction was trading at $7,025 a tonne at 0952 GMT from $6,984 at the close on Thursday.

Base metal prices rose after the U.S. stock market rallied after China refuted a report it was reviewing its euro-zone bond holdings due to the region’s debt crisis.

“Risk aversion seems to be leaving the market, the situation in Europe seems to be stabilizing and prices of industrial commodities are up on that,” said Eugen Weinberg, commodities analyst at Commerzbank.

“But the upside potential is limited, there are risks to the recovery in the second half of the year. Prices are still ahead of fundamentals, they could fall to $6,000 (a tonne).”

Others echo this, citing concern about demand from China, the world’s largest consumer, where the authorities are expected to tighten policy further to rein in price pressures.

CLUES

Many are also worried about demand from the United States, the world’s largest economy, where the housing market appears to be have stabilized – not all are convinced.

Clues to U.S. economic health and potential demand may be gleaned from the Institute for Supply Management’s manufacturing survey due next week.

“We are not out of the woods yet,” said Andrey Kryuchenkov, analyst at VTB capital. “People will be looking outside Europe for the moment ... Stocks will matter later in the year.”

Copper stocks in LME warehouses continued their descent. Latest data showed a 1,050 tonne fall to 476,725 tonnes, a drop of nearly 15 per cent since the middle of April.

Also on the radar were LME stocks of tin, down more than 25 per cent since late January to 20,060 tonnes, the lowest since September 2009.

The world’s largest tin producers are China and Indonesia.

“At 2,400 tonnes, China’s tin imports rose in April to their highest level since May 2009, which implies strong demand,” Commerzbank said, adding that low investor interest in tin was one reason why the price was more stable.

Tin hit a 4-week high of $18,200 a tonne.

It was trading at $18,100 a tonne from $17,990 on Thursday, zinc at $1,955 from $1,940, lead at $1,870 from $1,844 and nickel at $21,820 from $21,800.

Steel ingredient zinc and battery material lead hit $1,966.75 a tonne and $1,874.75 a tonne respectively, their highest since May 17.

Aluminum (AL-FT) was at $2,080 from $2,065.

Source: http://www.theglobeandmail.com/globe-investor/relief-rally-drives-copper-to-two-week-peak/article1583945/