Copper (HG-FT419.25-1.45-0.34%) edged to a new record high on Tuesday, as a weaker U.S. dollar and the metal’s tight supply and robust demand fundamentals attracted fresh inflow from funds.

Benchmark copper on the London Metal Exchange traded at $9,244 (U.S.) a tonne at 1118 GMT, up from a close of $9,220 on Monday. The metal used in power and construction earlier hit a record high for a second day, at $9,266 a tonne.

LME lead, nickel and tin rode copper’s coat tail’s to their highest in a month.

“Beside the usual suspects of a tight supply outlook that have been driving the copper market for many weeks, today definitely the weakening dollar is also helping,” said Eugen Weinberg of Commerzbank.

A softer dollar makes commodities cheaper for holders of other currencies.

The euro and sterling hit a three-week high against the dollar on Tuesday, extending gains on reported Asian sovereign buying of euros and as the U.S. currency lost more ground on worries about U.S. finances.

Mr. Weinberg added the London launch of new exchange-traded products – securities backed by physical metal – and their popularity will be a key factor underpinning the market’s supply outlook.

The ETPs launched on the LSE on Friday.

Meanwhile, global copper demand is expected to recover as industrial activity picks up into 2011, although elevated prices may encourage fresh mining production, said Aurubis, Europe’s largest copper producer.

“On the copper market, there are signs that the positive trend during 2010 will also continue in 2011. These are primarily supported by the fundamental situation on the market, whereby copper demand will grow further, borne along by the global economic recovery,” it said.

In broader markets, a swathe of economic releases could impact the metals market today, via currencies, which include Nov producer prices and retail sales at 1330 GMT and Oct business inventories at 1500 GMT.

Also, U.S. monetary officials will release their latest rate statement at 1915 GMT. No change in tone is expected.

STOCKS

LME zinc stockpiles saw a huge rise, the latest data showed, with a second inflow of around 44,000 tonnes into New Orleans bringing stocks there up by 70,000 tonnes in two days.

At just under 700,000 tonnes, stockpiles of the metal used in galvanizing are at their highest since December 2004, underlining bulging oversupply.The global market for refined zinc stands at some 12.5 million tonnes.

The inflow did little to dampen zinc prices, which were at $2,347 a tonne, up from $2,320 close.

This week is the prime settlement date for December and metal is being delivered against short positions.

Stocks rose today in copper, zinc, tin and aluminum.

Meanwhile, rising premiums for metal for immediate delivery, especially in copper, suggest that what metal there is, is tightly held.

Focus remains on LME cash warrants where a dominant holding rose to 90 per cent from 50-80 per cent, the latest data showed, reflecting tight nearby supply.

The premium for cash copper jumped to $70 over the benchmark three-month contract, the highest since October 2008.

Also, tom/next premiums for copper, the cost of rolling a position from Wednesday to Thursday, jumped to $13, the highest since July 2009, further highlighting the lack of immediate supply in the nearby market.

“There are still shorts covering and every analyst is still pointing to much higher prices across the metals so still fresh investment (on copper),” said one LME trader.

“The copper spreads being tight shows you there are still shorts around...so need to keep with the trend for now and that’s higher,” he added.

In other metals, lead, used in batteries was at $2,460, up from $2,440, having hit a one-month top of $2,472 earlier.

Stainless steel metal nickel traded at $24,920, up from $24,530 and closing in on five-month highs tipped in November at $25,200 a tonne.

Aluminum at $2,367 rose from $2,330 and tin climbed to $26,180 from $26,150. It earlier touched its highest in one month at $26,450 a tonne.

Source: http://www.theglobeandmail.com/globe-investor/copper-hits-record-on-tight-supply/article1836686/