Copper eases on econ uncertainty, dollar supports

Copper inched lower on Tuesday as patchy US economic data and perceptions of a slowdown in China weighed on prices, but a soft dollar and supply concerns lent some support.

Benchmark copper on the London Metal Exchange traded at $9,110 a tonne in official rings, having closed at $9,135 on Monday. The metal hit its highest in a month at $9,278.50 one a week ago, but has failed to gain any momentum.

Metals markets are treading water until the effects of China’s tightening measures become clearer and U.S and European macro figures brighten, analyst Max Layton at Macquarie said.

“People are worried that China is slowing down and also over the global macro data. If they had the security that Chinese data wasn’t going to print weaker...over the next two months, there would be many more buyers than there are now.”

China is the world’s top consumer of base metals, accounting for nearly 40 percent of copper demand last year.

Trade figures are due on Thursday with analysts expecting a small increase in refined imports from April when they fell 16.6 percent on the month to 160,236 tonnes.

“We think PMIs ...will show a soft landing for China and 2011 will be a rerun of 2010 - choppy through the first half and a run-up (in copper prices) towards year end,” Layton added.

Also adding support to prices, a strike at the world’s fifth-largest copper mine looked set to extend into a fourth day, while heavy rains disrupted some operations at Teck Resources operations in Chile, analysts said.

“Copper looks set to receive some support from the strike at the El Teniente mine and the closure of the Andacollo mine due to rain, but there are other forces at work here,” RBC Capital said in a note.

“The Saudis are planning to lift oil output by 500k bbls/day in June - their highest production levels in three years may well put a bit of pressure on oil prices and hence metals.”

US crude retreated on Tuesday.

LME ring traders said the soft dollar was providing price support but that risk lay skewed towards higher ground. “The market is bearish today — beware the upside,” one said.

The dollar hit a one-month low against a basket of currencies on Tuesday and a record trough against the Swiss franc as bearish comments from a Chinese official clouded an already weak outlook for the greenback.

A weaker dollar makes dollar-based commodities cheaper for holders of other currencies.

NICKEL PROSPECTS

The nickel market looks like it will soften over the next few months as European stainless consumers hold off metals purchases in part due to slow demand, but also falling prices, a physical nickel trader said.

“If this were 10 years ago and it were a pure supply and demand game, then I’d be selling it ...but stronger copper and the euro are maintaining the complex,” the trader said.

Nickel traded at $22,580 in rings compared with a close of $22,630 on Monday.

Three-month tin was untraded but bid $25,800/25,810 from $26,005 while zinc, used in galvanising was at $2,272 in line with $2,272 on Monday’s close.

Battery material lead traded at $2,505 from $2,502 and aluminium changed hands at $2,687.50 from $2,660. US aluminium producer Ormet Corp has begun to restart its idled alumina refinery in Burnside, Louisiana, and expects to be producing the intermediate material for making aluminum metal in the fourth quarter.