Copper broke a four-day losing streak on Tuesday, rising modestly after better-than-expected French and German growth data, but a firm dollar after a report showing forecast-beating US retail sales kept a lid on metals prices. Three-month copper on the London Metal Exchange closed at $7,416 a tonne from $7,395 at Monday's close, and rebounded from a session low of $7,366, the weakest level in more than a week.
Copper, which has shed about 12 percent since the beginning of May, has been trapped in a range of $7,300-$7,600 over the past three weeks in thin volumes during the European holiday season. "There's no indication of any spot demand. So when there's nothing else, the big players remain sidelined and try to figure out the macro outlook," said analyst Andrey Kryuchenkov at VTB Capital in London.
Forecast-beating German and French growth data eased concerns that the euro zone's two biggest economies were sliding into recession with the bloc's ailing periphery, lifting the euro. "The slightly positive news out of Germany and France this morning has helped the market find some footing," RBC said in a research note. "Overall the market remains on the defensive as concerns China is behind the growth curve continue to saturate the market."
LME aluminium closed at $1,856 a tonne from $1,867 at the finish on Monday. LME stocks data showed a rise of 29,000 tonnes. UBS was negative about aluminium, which has fallen some 21 percent from a peak of $2,361.50 in March, in a third quarter commodities research report.
"Our least-preferred commodities are those with high exposure to China's fixed capital formation, which face broader deterioration in demand and little prospect of imminent production cuts such as nickel, aluminium, and met-coal," the note said. UBS forecasts three-month aluminium to average $0.95/lb ($2,095/tonne) in the third quarter, before rising to $1.04 ($2,293/tonne) in the last quarter.
China has enough alumina stockpiles to prevent a shutdown of its aluminium plants in coming months, despite a sharp fall of bauxite imports after Indonesia imposed a 20 percent export tax on minerals in May, according to Kunal Agrawal, director of Asia Metals & Mining at BNP Paribas Securities. This undermines prospects that a fall in output by the world's biggest producer will support metal prices. "Any aluminium capacity shutdowns in China in the coming months will not be for want of raw material," Agrawal said.
Three of China's biggest alumina producers plan to invest at least $1 billion in bauxite mines and refineries in Indonesia to guarantee supplies of the aluminium raw material. Chinese bauxite imports plunged to around 187,000 tonnes in June, from around 5.6 million tonnes in May. In other LME metals, three-month lead closed at $1,855 a tonne from $1,867 on Monday. The tom-next spread went into a backwardation as high as $9.30 ahead of third Wednesday, the monthly prompt date. LME data showed a dominant position in lead holding 80-90 percent of warrants and cash positions. Zinc closed flat at $1,819 a tonne, tin at $18,275 from $17,700, and nickel at $15,470 from $15,375 after touching a three-year low on Monday.
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