Copper prices tracked gold on Tuesday and the 6.8 percent jump in inventories dampened the market's overall performance, traders said. "Copper had a look on the downside... but once gold recovered the rest of the metals followed it higher," a London Metal Exchange (LME) trader said.
"Gold had a better close - that helped copper." LME copper futures for delivery in three months closed at $7,490 a tonne, down $55, after touching a low for the day of $7,370 in the open outcry trading session.
Sentiment was dampened after gold fell to its lowest in more than a week at $573.10 an ounce, but copper narrowed its losses when gold recovered ahead of the LME close.
By 1540 GMT gold was indicated at $582.20/95 an ounce, against its last quote in New York on Monday at $580.4/1.90. Copper stocks in LME-warehouses rose some 7,750 tonnes overnight to 120,825 after a 7,075-tonne increase in Singapore.
"We think there is more to come," another trader said. "I am aware of another 10,000 tonnes that are likely to come onto warrant."
Last week lead, nickel, tin and zinc all hit contract highs, but copper was left behind. "The market does seem confused by copper's performance," BaseMetals.com analyst William Adams said in a report.
"It looks like copper is taking its lead more from oil and gold than its sister metals. This suggests that some funds are still liquidating their copper longs while there are still buyers around."
But underlying demand continued to look strong while supply issues remained at the foret, with labour action, strikes and declining inventories serving to highlight constrained supply, a Barclays Capital report said.
"We expect new highs to be reached in most base metals markets amid heightened volatile conditions," Barclays said.
The world's second-largest copper producer, Phelps Dodge Corp, projected on Tuesday a strong outlook for copper in 2006 and a balanced market in 2007, with global consumption for copper growing by 5 percent in 2006.
The firm forecast a fourth quarter copper price of $7,496 per tonne or 3.40 per lb, resulting in a full-year average of $6,834 or $3.10b. For 2007, it forecast a copper price at $5,512 or $2.5 or higher.
Aluminium ended at $2,704 from $2,707 on Monday.
The world's third-biggest integrated aluminium group Norsk Hydro tabled its third-quarter results on Tuesday. "The market for primary metal is expected to remain fairly balanced with a slight shift toward surplus in 2007," Norsk Hydro said. "The main uncertainties continue to relate to developments in China and in alumina and energy prices."
Alumina, produced from bauxite, is the main raw material for aluminium production which is highly energy-intensive. Zinc closed flat at $3,900 after touching a record high of $4,020 last week. Nickel was untraded in the last trading session and was last quoted at $32,200/32,250 against $32,400 on Monday.
Nickel hit a new peak of $32,625 last week on supply concerns in New Caledonia and globally tight stocks. The market was constrained ahead of Wednesday's meeting of the US Federal Reserve on interest rates, analysts said.
"We believe that markets are moving away from focusing on their own internals, and are instead nervous ahead of the upcoming US statistics and the Fed meeting," analyst Edward Meir at Man Financial said in a note.
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