Copper falls

Copper reversed earlier gains to turn negative on Tuesday, weighed down by a firmer dollar and growing perceptions that prices had risen too far and that demand prospects remained poor. Copper for three-month delivery on the London Metal Exchange fell to $4,970 a tonne from $5,095 at the close on Monday after earlier rising to a high of $5,180.
The dollar was higher after US house price and consumer sentiment data. A higher US currency makes metals priced in dollars more expensive for holders of other currencies. "The market seems to have topped-out," said Alex Heath, head of base metals trading at RBC Capital Markets. "It has been following the dollar...(but) there is a technical expectation that some of the markets have got ahead of themselves."
Heath added that US consumer confidence data, which fell in June after two straight months of gains, had also weighed on sentiment. Copper, used in power and construction, has risen by about 60 percent this year but is expected to come under greater pressure in coming months, as markets face a seasonally quiet trading period and as a supportive restocking process from China has begun to tail off as prices rise.
"SRB purchases are almost over," said Eugen Weinberg, an analyst at Commerzbank, referring to purchases by China's State Reserves Bureau which have underpinned the copper price for much of 2009. "As soon as the market realises that... and that production has increased while demand has declined, the market will turn sharply." Some analysts also reported scattered speculation that the SRB could act as a seller.
A recent spate of mixed data has sparked erratic moves in industrial metals prices and investors struggled to assess the economic climate. Underlining that the road to recovery will be long, latest data showed Japan's jobless rate rose in May to its highest in nearly six years. Copper has risen by about 21 percent so far this quarter, shy of a gain of more than 30 percent in the first quarter, and after slumping more than 50 percent in the last quarter of 2008.
Analysts and traders warn this year's gains exceed weak underlying fundamentals, as the world grapples with the aftermath of the credit crisis. Among other industrial metals, aluminium closed at $1,630 from $1,640. LME stocks of the metal used in transport and packaging hit a record high, rising 27,350 tonnes to near 4.4 million tonnes.
Aluminium, up about 16 percent in the second quarter, is on track to close out its best quarter since the end of March 2008 when it gained 24 percent. Zinc ended at $1,545 from $1,560, while battery material lead closed at $1,690 from $1,703. Tin was last bid at $14,150 from $14,600 and nickel was at $15,350 from $15,800. Nickel, up about 60 percent this quarter, is on track to close its strongest three months since the fourth quarter of 2003.