Copper slips from 2-1/2 months high

Copper retreated from a 2-1/2 months high on concerns about Chinese demand after weak factory data in the top metals consumer and following a rise in inventories. Three-month copper on the London Metal Exchange closed up 0.4 percent to $6,145 a tonne after earlier hitting $6,203.50, the highest since Jan. 5.
LME prices pulled back after a private survey showed activity in China's factory sector dipped to an 11-month low in March as new orders shrank, signalling persistent weakness in the world's second-largest economy.
"The general trend is up... however, the weak China data this morning is putting the brakes on the upward movement," said Daniel Briesemann, an analyst at Commerzbank in Frankfurt.
"I think there's still room for more price recovery. The low prices of some of the metals, particularly copper and zinc, are not justified by fundamentals."
Copper has rebounded 14 percent since touching a 5-1/2 year low of $5,339.50 in late January, partly fuelled by bearish investors buying back their short positions.
Briesemann forecasts the copper price to end the year at $6,500.
Also dampening copper prices on Tuesday was a rise in LME copper inventories, raising more questions about whether rising mine supply was creating a market surplus.
Another factor weighing on the market was a recovery of the dollar as US March factory activity notched up the best gain since October and new single-family home sales surged in February to their highest level in seven years.
A stronger dollar makes commodities priced in the US currency more expensive for buyers using other currencies.
LME lead was the best performer, ending up 0.7 percent at $1,850 a tonne after touching a six-week peak at $1,860. A short squeeze kept the boil under prices after a sharp drop in available inventories on Monday.
"Given the abrupt reduction in warrant availability... it looks as though the front end will continue to be squeezed for the near term," said Macquarie analyst Vivienne Lloyd in a note.
Warrants are legal documents showing ownership of LME inventories.
Nickel was the biggest decliner, tumbling 2.7 percent to finish at $13,950 a tonne after LME stocks increased by 1,482 tonnes, moving towards a record high touched earlier this month.
Aluminium fell 0.4 percent to close at $1,791 a tonne, tin shed 0.6 percent to $17,550 and zinc edged up 0.1 percent to end at $2,086.