Copper trims losses

Copper pared losses on Tuesday after falling over 4 percent to a three-week low on Tuesday, as US consumer confidence data dragged down the dollar, making metals cheaper for local currency holders. Other commodities such as oil and gold dropped as world stocks lost ground after a report that major US banks may need more capital, adding to jitters about a possible swine flu pandemic.
Copper for three-months delivery on the London Metal Exchange dropped to $4,158 a tonne, its lowest since April 3, before bouncing to close at $4,220 a tonne. But copper was still down compared with $4,350 on Monday when markets fell on fears a deadly swine flu outbreak could reach pandemic proportions.
"The dollar's weakened sharply, metals have found their feet and have steadied themselves, are generally off the lows now," said analyst Leon Westgate at Standard Bank. "The market was starting to correct itself before we even heard of swine flu," said one LME trader. "It's also starting to hit a few technical areas where people sell more." "Everyone got carried away with China buying."
China's State Reserves Bureau's purchase of large quantities of copper in the first three months is widely believed to have driven copper's rise of more than a third this year. However, fresh data suggests the demand outlook remains gloomy. the International Copper Study Group (ICSG) said the world copper market saw a surplus of 155,000 tonnes in January, compared with a deficit of 22,000 tonnes in January 2008..
"The current surplus should be smaller if we look at falling stockpiles at LME and Shanghai Futures Exchange," said Judy Zhu, an analyst at Standard Chartered. But soothing nerves, LME copper stocks have been falling since February and on Tuesday dropped by 5,000 tonnes to a three-month low of 420,275 tonnes. Cancelled warrants - material earmarked for delivery - rose to 70,125 tonnes from 67,600 tonnes the day before.
The market believes the recent rise in cancelled warrants represents metal heading for China, the world's biggest copper consumer. Analysts attributed the backwardation - which more commonly occurs in bullish markets - to a recent fall in stocks signalling possible tightness in the copper market.
Aluminium, used in transport and packaging, closed at $1,436 a tonne from $1,446, with losses limited despite a massive jump of 24,650 tonnes in stocks, bringing the total to a record above 3.7 million tonnes. Zinc, used to galvanise steel, was down at $1,341 from $1,372, while battery material lead fell to $1,292 from $1,360. Nickel was at $10,920 from $11,375. Tin was at $11,900 a tonne from Monday's $12,400, having dropped nearly 6 percent to a day's low of $11,700 a tonne.