Copper rose on Tuesday as year-end book squaring prompted investors to reverse positions after they had knocked the metal down to its lowest in 4-1/2 year on concerns about slowing growth in China and a looming surplus. A weaker dollar also helped copper recover its poise by making the metal cheaper for non-US investors.
Three-month copper on the London Metal Exchange rose 0.56 percent to close up at $6,325 a tonne, edging away from a 4-1/2 year low of $6,230 a tonne hit on Monday. The metal is still on course to fall some 14 percent this year. "The bounce appears to be driven by some short covering ahead of year-end, following the recent declines. Volumes however are especially thin," said Dee Perera, analyst at Marex Spectron.
Most investors are cautious about copper going into 2015, however. The next key data point for them is due on Wednesday with the release of the HSBC China manufacturing PMI. According to a Reuters poll the data will likely show growth in the sector slowed to an 18-month low in December. China consumes some 45 percent of the world's copper.
Investors are hoping Chinese authorities will roll out more stimulus measures to support the economy. Still, a top Chinese government think tank said on Monday growth is expected to slow to 7 percent next year from a forecast 7.3 percent this year. Also weighing on copper are signs of increased supplies. LME copper stocks are at 172,250 tonnes, having been on a rising trend since August when they fell as low as 140,675 tonnes.
Offering the metal some support however, cash copper on the LME has been trading at a premium to the three-month price since July, indicating physical metal is still not easy to come by despite a looming surplus. In the wider markets, global equities, seen by some as a proxy for growth, fell as light-volume end-of-year trade focused on worries about Greece's future in the euro zone. Oil prices hit 5-1/2 year lows, keeping a lid on gains in other commodities like copper.
Aluminium was last bid down 0.11 percent at $1,857 a tonne, while lead closed up 3 percent at $1,887 a tonne in volatile trade, having earlier touched its lowest since June 2012 at $1,815.25. Zinc ended up 2.05 percent at $2,186 a tonne, nickel closed up 0.17 percent at $15,075 a tonne while tin ended up 0.62 percent at $19,370 a tonne.
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