Copper bounced on Tuesday as physical buying interest picked up after three days of price declines but worries over a worsening debt crisis in the eurozone and the United States, as well as positioning ahead of the US Thanksgiving holiday, capped gains. Three-month copper on the London Metal Exchange closed at $7,330 tonne at 1600 GMT, from $7,310 at the close on Monday. It fell as low as $7,252 on Monday, its weakest in almost a month.
"Yesterday it got a bit overdone with all the doom and gloom. There's a disconnect between solid fundamentals, whether they're falling stocks, production shortfalls or pockets of demand and...what is happening on the financial markets," said analyst Robin Bhar of Credit Agricole.
The inability of US and European leaders to tackle the mounting debt crisis affecting their countries was weighing on market sentiment and limiting investors' desire to bet on assets such as industrial metals. US lawmakers abandoned their high-profile effort to rein in the country's ballooning debt on Monday in a sign that Washington likely will not be able to resolve a dispute over taxes and spending until 2013. There were also signs US economic growth may be slowing as an estimate for third-quarter growth was revised down on Tuesday.
London Metal Exchange inventories have decreased continuously by a total of around 70,000 tonnes since the end of the European summer in mid-September 2011 and are now just below 400,000 tonnes. Helping metals, the dollar eased slightly against a basket of currencies but was still near a six-week high due to a recent sharp pullback in global risk appetite as the sovereign debt storm intensified on both sides of the Atlantic. A softer US currency makes dollar-priced commodities such as base metals more affordable for holders of other currencies.
China's imports of refined copper for example, rose 7.2 percent in October on the month to hit an 18-month high, fuelled by steady demand. Underpinning copper, an ongoing strike at a large mine in Indonesia owned by Freeport-McMoRan Copper & Gold Inc, has reduced supply availability.
An end to the strike was not in sight yet as Richard Adkerson, Freeport-McMoRan's chief executive, this week described striking workers' wage demands at its mines as "excessive and unreasonable". In other metals, Barclays Capital is holding a dominant long position in the London nickel market, contributing to higher nearby prices on the back of unseasonal Chinese demand, and this is forcing shorts into expensive covering, trading sources said. Nickel inventories, up 2,058 tonnes to 85,998 tonnes according to latest data, have fallen by almost 40 percent this year.
Nickel ended at $17,550 from $17,775, zinc closed at $1,940 from $1,915, and lead was $2,019.50 from $1,995. Tin finished at $20,800 from $20,450, while three-month aluminium was untraded in final rings but quoted at $2,070-2,071 from $2,067. It hit a 14-month trough of $2054.75 on Monday.
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