Copper pares gains

Copper trimmed gains after jumping more than 3 percent on Tuesday as an unexpected fall in US housing data dampened stock market induced optimism that the worst was over in the global economic downturn. Copper for three-months delivery on the London Metal Exchange rose as high as $4,673.75 a tonne earlier in the day and before the data. It later trimmed gains to close at $4,550 a tonne, slightly up compared with Monday's $4,520 a tonne.
Prices of copper, a key material in the power and construction industries, have in recent days see-sawed with sentiment on equity markets, which analysts say could mean the global economy has reached a crisis point. But some analysts do not share the opinion that the economy is out of the woods.
"There was no fundamental reason for copper's rise," said Abe Ulusal, metals trader at Mitsui Bussan Commodities. "I believe funds have been long, expecting the permits to rise. But when the data came out falling, the sell-off started."
Stocks of aluminium in London Metal Exchange warehouses surged through the 4 million tonne level to limit the gains in prices of the metal used widely in transport and packaging. Three-month aluminium on the London Metal Exchange closed at $1,500 a tonne compared with Monday's $1,520 a tonne.
Part of the reason behind the rally in copper prices this year - about 50 percent - has been stockpiling by China, the world's largest consumer. But that, analysts say, is coming to an end and a seasonal lull in industrial activity over the next few months will also weigh on copper, as will the realisation that prices are now too high for China's State Reserves Bureau and consumers.
However, metals markets will closely watch LME stocks, which for copper have fallen to around 350,000 tonnes, a drop of nearly 60 percent since late February and the lowest since early January, for clues to demand. Analysts say most of the drop can be accounted for by deliveries to China where the premium for physical metal has been high enough to make it worthwhile.
Prices of steel materials zinc and nickel traded at $1,526 a tonne and $12,465 a tonne from $1,518 and $12,350 respectively, while battery material lead changed hands at $1,485 from Monday's last quote at $1,485. Tin was last quoted at $13,625/13,650 from $13,650 on Monday.
Worries about a supply squeeze are reflected in the premium of more than $200 a tonne for cash material over the three-month contract. But that is expected to fall as the dominant position controlling between 50 and 80 percent of cash warrants on LME stocks has slipped to between 40 and 50 percent.