Copper steadies

Copper was broadly flat on Wednesday as concerns about the demand outlook in top consumer China were offset by a weaker dollar and near-term tightness in stocks. Copper prices have slipped more than 2.5 percent this year as China battles with structural reform, and as a harsh winter in the United States has held back economic growth. A move by the Chinese central bank to drain funds from the market on Tuesday has further muddied the outlook for demand for the industrial metal.
Three-month copper on the London Metal Exchange (LME) was down around 0.1 percent at $7,180 a tonne at the close after hitting a low of $7,171.50 earlier in the session. While copper hit an 11-day high at $7,206.50 on Monday, it has failed to build on that momentum.
"There are three reasons why the market is concerned about China: government policies against environmental degradation, efforts to combat overcapacity and the effect of deregulation," said Nic Brown, head of commodities research at Natixis. "Until the market reaches a consensus, we're going to see caution in both directions." A short-term dearth of copper, seen in tight futures spreads and shrinking stocks of on-warrant metal in LME warehouses, has kept a floor under copper prices.
Daily data from the LME showed copper stocks were down to 290,625 tonnes on Wednesday, their lowest level since December 2012. A weak dollar, which briefly touched its lowest this year against a basket of currencies, lent support to all metals. A softer dollar makes commodities priced in the greenback cheaper for holders of other currencies. Nickel was the biggest gainer on Wednesday, up 0.5 percent to $14,525 a tonne at the close.
Nickel has risen more than 3.5 percent so far in February after major supplier Indonesia enforced a ban on mineral exports in mid-January. Broker Triland said in a note on Wednesday that nickel's consolidation above key technical levels has attracted short-covering as well as fresh fund and momentum-based buying, which looks set to lift prices into March. "We believe the $15,500 area is the technical target for nickel in the next month or so," Triland said.
BHP Billiton's marketing chief said on Tuesday that although prices of nickel, an ingredient in stainless steel, had been boosted by the Indonesian ban, it was hard to predict how long this support would last. He also said the aluminium market would remain tough for producers in the foreseeable future as high inventories weigh on prices and idled capacity is poised to resume output and cap any price rises. Benchmark three-month aluminium was up 0.2 percent at $1,769 a tonne on Wednesday. In other metals, zinc fell 0.4 percent to $2,060 a tonne, while lead was down 0.3 percent at $2,167 a tonne. Tin inched up 0.2 percent to $23,195 a tonne.