Copper declines

Copper dipped on Monday as metals took a breather from September's rally, and analysts said that given mixed recent US economic data, bullish data would be essential for the metal to crack the $8,000 ceiling. Benchmark copper for three-months delivery on the London Metal Exchange finished at $7,910 a tonne from a close of $7,945 on Friday. Monday's high was $7,986 a tonne.
Prices of the metal used in power and construction rallied to a five-month high of $7,990 a tonne last week, driven by expectations of further downward pressure on the US dollar and improved fourth-quarter demand. "The commodities complex as a whole has benefited from this recent bout of dollar weakness. Clearly copper is getting close to that $8,000 level where we got to in April," said analyst Dan Major at RBS.
A lower dollar makes commodities priced in the US currency cheaper for holders of other currencies. "We are still at the top of that trading range. I think we need to get some decent data surprises to the upside for us to break through the $8,000 mark," Major added.
Latest data showed US new home sales were flat in August, business spending plans rebounded strongly while durable goods orders were down overall. The market waiting for surveys of purchasing managers in the manufacturing sector next week.
"Given the state of the economy, I find it difficult to justify copper at $8,000. Supply is tight but if demand drops off again and we were to go into another weak period of growth, supply won't be tight anymore," said BaseMetals.com analyst William Adams.
Expectations of tighter supplies have narrowed the contango between the cash and the three-month copper contract to near zero from about $28 a tonne in early August. The discount in Shanghai copper to LME copper shot up to 1,546 yuan compared with 544 yuan last Tuesday, pushing Asian buyers away from the London market.
"There may have been selling overnight because of a closed arbitrage but the overall theme is still the same in that you've got relatively healthy demand from countries like China (and) supply for copper is growing at a slower pace than demand," said Merrill Lynch analyst Michael Widmer.
He added that while lacklustre economic growth in developed countries was a concern, the chances of a double dip global recession have lessened while developing nations, which are key to metals demand, are faring well378,125, their lowest level since last November, down nearly one third from a six-year high hit in February.
Among other industrial metals, aluminium ended at $2,293 a tonne from $2,317, lead finished at $2,269 from $2,296 while zinc, used to galvanise steel, wound up at $2,207 from $2,248. China's steel production cuts, which hurt iron ore demand and prices at the start of a usually peak season this month, will be in focus at this week's global steel and iron ore conference at the port city of Dalian. Tin finished at $23,650 up from $23,600, still underpinned by supply constraints from top exporter Indonesia, while stainless steel ingredient nickel was a touch firmer, finishing at $23,050 from $22,875.