Copper futures surged Thursday on the back of heavy fund buying, traders said.

"It's all fund related," one trader said, noting that buying seemed to be focused on the Comex division of the New York Mercantile Exchange. The July Comex copper contract hit an intra-day high of $1.282 a pound, up a little more than 5 cents from Wednesday's close at $1.2315, and ended the day at $1.273 a pound, a 4.15-cent gain.

The three-month copper contract on the London Metal Exchange made similar, though less lofty, strides. The metal gained $32 in Thursday's second ring to close at $2,727.50 a tonne vs. Wednesday's $2,695.50-a-tonne close, and notched another $47.50 gain in after-hours trading to close the final kerb session at $2,775 a tonne.

"There seems to be some misleading information out of China this morning, suggesting that there could be a shortage of copper in China as early as June due to the diverting of metal from Shanghai," another trader said. "That made people nervous. They started buying and that triggered short covering from the funds."

Reports of a shortage pending in China was misinformation, he said. "There are mountains of copper sitting in warehouses over there."

Another trader mentioned metal that was on its way to the United States from Chile. That influx of metal, plus a positive outcome from contract negotiations at Noranda Inc., Toronto, could have an immediate impact on premiums for physical metal.

"We're sitting on pins and needles to see if Noranda settles or not," the trader said of the ongoing contract negotiations between the company and the United Steelworkers union at Noranda's Canadian Copper & Recycling (CCR) refinery in Montreal East, Quebec (AMM, May 26). If there was a contract settlement, premiums could fall by as much as a cent a pound, he added.