Copper prices consolidated on the London Metal Exchange (LME) on Tuesday after bouncing some $100 from last week's lows as supply worries dissuaded investors from fresh sales. "We had some fund selling at various times, but there was solid support down around $3,570 a tonne," a dealer said.
Copper spiked up to $3,635 a tonne at one point, before ending at $3,585. It closed at $3,605 on Monday, but was as low as $3,510 on Friday. "I think generally the base metals have shown that the dip of last week was only a minor correction that people happily bought. The ones who didn't buy are regretting it bitterly already," another dealer said. Since last week's dip market dealers have bought metal to cover short positions, which has attracted investment funds and speculators back to copper. "Copper does not really want to give up...This is a market that is difficult to sell short," a systems-based investment fund source said.
Copper, used in electric cables and computer chips, has risen about 30 percent in value in the last year, hitting a record high of $3,725 this month as world supply lags a China-led surge in demand for the industrial metal.
However, metals industry consultant GFMS expected the recent storms in the southern United States to have limited impact on the market. "Rebuilding New Orleans and housing the refugees that have scattered across the US will undoubtedly result in an increase in base metals consumption.
"However, we believe that much of this increased consumption will be offset by the increased availability of scrap, thus reducing the impact on primary metal demand." Yet supply remained a worry.
Workers at bankrupt US copper miner Asarco, a unit of Grupo Mexico, on Monday snubbed an offer to end a 73-day strike at its Texas and Arizona operations but said they were ready to hold new talks.
Although copper stocks in the LME's warehouses rose 4,250 tonnes to 75,100 tonnes, nearly three times as much as the 31-year trough of 25,525 tonnes on July 21, they are still at historically low levels.
Analysts noted that LME stocks rose for the seventh consecutive week last week.
"But it is interesting that it was also the smallest increase. Indeed, an increase of just 5,548 tonnes in total exchange stocks was hardly substantial and combined stocks of only 122,189 tonnes still leaves the market vulnerable as we head towards the end of the summer lull," Angus MacMillan, metals strategist at Bache Financial, said in a report.
Major producers were upbeat on Tuesday. Miner Antofagasta forecast strong demand as expectations matched its first half results for this year. And Rio Tinto Ltd said its net profits would almost double this year, with demand strong across the board, notably in China. Other LME metals were quiet.
Aluminium was at $1,863, compared to a close of $1,859, and zinc was at $1,402 from $1,419.
Lead was at $866, against $871, while nickel settled at $14,325 from $14,525. Tin was at $6,700 against $6,875.
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