Copper prices rebounded from a near 3 percent drop on Tuesday as rallying equities and robust US consumer confidence data helped offset investor concerns over domestic copper sales by China.
Copper for three-months delivery on the London Metal Exchange closed at $4,660 a tonne from $4,610 in the previous session. Earlier, the metal used in power and construction, hit a low of $4,480. Steel making ingredient nickel rose more than 5 percent to a high of $13,450 a tonne but ended at $13,400 versus $12,775.
European equities turned positive after US consumer sentiment readings came in stronger than expected. The news helped copper off day lows as traders were re-assured over demand prospects. US consumer confidence soared in May to its highest level in eight months as severe strains in the labour market showed some signs of easing, though Americans' mood remained depressed by historical standards.
"Copper is up because of good numbers out of the States, the Dow is up on the back of good US confidence numbers," said Robin Bhar, senior metals analyst at Calyon. Price gains remained capped however, on news that China's State Reserve Bureau sold off a small volume of its contracted copper imports over the past month, and might sell up to 50,000 tonnes, reversing course after months of buying.
"If the SRB is starting to release copper into the domestic market...the domestic market will remain well supplied," said Steve Hardcastle, an analyst at Sucden Financial. "This means physical premiums will stay constant and the market will stabilise - in other words we won't have upward pressure on prices."
Elsewhere, news that Rio Tinto Ltd has agreed to cut key iron ore prices to Japanese steelmakers by a third in this year's first contract deal stoked concerns about the overall health of the industrial metals economy. "We've seen base metals pick up since the beginning of the year, but... steel prices and iron ore prices haven't," said Societe Generale analyst David Wilson.
"You would have thought that iron ore and steel prices, as key ingredients for infrastructure building, should have picked up equally as strongly if the pickup in base metals is driven by demand," he added. Indicating copper demand may be tailing off, cancelled warrants of copper - material earmarked for delivery - fell to 47,625 tonnes from 52,875 tonnes on May 21.
Underpinning some expectations demand could plough on however, stocks of copper at LME warehouses fell by 6,800 tonnes to 326,575 tonnes. "Demand may start to lessen, but the Chinese economic recovery is under way and I think their economy will continue to draw in new metal," said John Meyer, an analyst at investment bank Fairfax. Copper prices have nearly doubled in value so far this year, as Chinese buying recently prompted a rise in cancelled warrants that now appears to be subsiding.
The demand outlook for aluminium remained grim as inventories of the metal used in transport and packaging climbed 10,300 tonnes to scale a new high above 4.2 million tonnes. Western world unwrought aluminium stocks fell to 1.421 million tonnes at the end of April, compared with a revised 1.537 million in March, industry data showed.
Aluminium prices closed at $1,452 from $1,446. Steel material zinc ended at $1,500 from $1,517 a tonne, while battery material lead was at $1,445 from $1,435. Tin closed $13,600 versus $12,775.
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