Copper slipped on Wednesday after an increase of almost 2 percent in the previous session as a stronger dollar and soft US economic data offset supply worries due to strikes at the world's largest copper mine. Aluminium hit $2,675.25 a tonne, its highest since early June and tin rose to a session peak of $29,000 a tonne, its highest since mid-May.
Benchmark copper on the London Metal Exchange closed down at $9,780 a tonne. The metal, used in power and construction was about 4 percent off a record high of $10,190 hit in February. It rose 1.7 percent on Tuesday to close at $9,820 a tonne, ending a four-day losing streak, as the strike at Chile's giant Escondida mine continued. "The data itself, coupled with a somewhat stronger dollar, is putting pressure on prices," Commerzbank analyst Daniel Briesemann said.
However support was coming from supply constraints at the world's largest copper mine. A six-day strike at Chile's huge Escondida mine showed no sign of ebbing, but talks between President Sebastian Pinera and unionists at state giant Codelco appeared to ease the threat of contagion. "It looks like the strike is going to continue dragging on and that has significant implications for a market that is already tight," Barclays Capital analyst Gayle Berry said. In a Reuters poll, analysts forecast the copper market will be in a 343,150 tonnes deficit in 2011. Some think supply tightness may push copper prices up to record levels again. "Although it may take a few attempts to break the $10,000 mark, we expect copper prices to move above that level later in the year," Credit Suisse said in a note.
Other metals have also rebounded since a widespread commodity price fall in May. "I am impressed with the strength of other metals, aluminium in particular, which has rebounded in the last few weeks after a period of weakness," Berry said. But aluminium prices are not likely to move up significantly further this quarter as the previous fall was overdone but current prices seem appropriate to fundamentals now, Berry added. Barclays Capital forecast aluminium prices will average $2,650 per tonne this quarter.
Inventories of copper in LME-registered warehouses rose by 700 tonnes to 469,800 tonnes, over a third higher than in December last year. High stocks of copper in the last few months raised concerns over reduced demand in top consumer China. Chinese metals import slowed down in the first half this year also because consumers were tapping into their stocks rather than importing more material, analysts said.
But the destocking phase may be close to an end. "Data for the first half as a whole strongly suggests destocking in a number of the commodities, although the most recent monthly data points suggest this destocking may be coming to an end," Macquarie said in a note. Aluminium closed at $2,644 a tonne from $2,652. Tin ended at $28,745 a tonne from $28,600 while zinc, used to galvanise steel, closed at $2,521 a tonne from $2,532 Tuesday close. Battery material lead closed at $2,690 a tonne from $2,720 while nickel ended at $24,395 a tonne from $24,100.
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