Copper inched higher on Tuesday as the euro steadied against the dollar ahead of a series of U.S. economic reports, while signals that Chinese consumers are buying provided a floor for prices.
Benchmark copper on the London Metal Exchange traded at $8,880.50 a tonne in official rings, up from $8,840 at Monday’s close.
The metal used in power and construction hit its lowest in more than five months at $8,504.50 last week and stands some 12 percent below record highs of $10,190 in February.
“The market is trying to find a bottom here following these two weeks of significant correction,” analyst Stefan Graber of Credit Suisse Private Banking said.
World stocks dipped, with a key index hitting a one-month low on lingering doubts over the pace of U.S. economic growth and worries over Greece’s debt.
A slightly stronger euro was supporting base metals by making them cheaper in dollar terms, while signs of the long-awaited return of Chinese end users suggested demand fundamentals were robust, Graber added.
“Shanghai warehouses have registered significant outflows in copper and aluminium (from) late March. Also the LME-SHFE spreads have tightened a bit,” he said. “Physical consumers are using this price weakness to step up purchase and replenish inventories.”
LME copper stocks grew by 500 tonnes, the latest data showed, but cancelled warrants — the metal tagged for removal from warehouses — are trending up in Asia.
Shanghai copper stocks have dropped by around 40 percent since mid March, while the price differential between the LME and Shanghai Futures Exchange narrowed in May.
The Shanghai copper forward curve and the SHFE-LME price differential point to some early signs that the Chinese copper market is tightening up,” added Macquarie.
“We recommend scale-down buying of the dip.”
Data that could influence the metals via currencies includes U.S. April housing starts and building permits at 1230 GMT and U.S. industrial production/cap use for April at 1315 GMT.
The price to roll an LME aluminium short position for tomorrow/next day delivery shot up to $7 on Tuesday, its highest since mid-March, reflecting an absence of available metal for delivery on the May third-Wednesday prime prompt date.
Financing deals are estimated to have tied up about 70 percent of record high LME aluminium stocks at above 4.70 million tonnes.
These deals, many made by banks and merchants in the aftermath of the credit crunch in 2008, have locked metal up in long-term rent agreements.
Aluminium traded at $2,524 a tonne in rings, from $2,547. Tin was at $28,400 from $28,000, while zinc was untraded but bid at $2,140/2,145 from $2,155 on Monday’s close.
“The moves by aluminium and tin will be closely watched in the coming days as they are the two metals that still have a reasonably sized, speculative long commitment,” said RBC Capital in a note. “There are good reasons to be long of both (cost issues in the case of aluminium and supply issues in the case of tin), so it will be interesting to see if the bulls can weather the selling storm that now looks set to hit the market.”
Battery material lead was at $2,300 in rings from $2,283, and nickel, also untraded, was bid at $24,450/24,475 from $24,355.
© Thomson Reuters 2011