Copper prices steadied on Tuesday as expectations of tighter supplies supported prices and the market looked for further clues to determining the strength of demand in top consumer China. Benchmark copper ended unchanged at $5,125 a tonne, recovering from losses seen after New York opened. The metal used in power and construction is up about 5 percent since hitting a six-year low of $4,855 in August.
One reason behind that optimism has been output cuts, analysts say. Those and disruptions caused by severe weather conditions are starting to add up and could tighten supplies over the coming months. "The market is tightening, but we now need to know what's going to happen with demand, which has been subdued," Capital Economics commodities economist Caroline Bain said. Negative factors for copper include slowing demand growth as China looks to reposition the economy towards consumer-led growth and away from exports and investment.
Industry sources said stronger Chinese demand in recent weeks was probably for restocking and likely to be brief. Meanwhile aluminium hit $1,516, its highest level in more than a week on news that US-based Alcoa will idle three of its four active US smelters, reducing annual capacity by 500,000 tonnes in the steepest cuts yet made by a producer to battle oversupply and sinking metal prices. But Alcoa's cut is a fraction of a global aluminium market estimated at 57 million tonnes this year. Aluminium surrendered some early gains and ended up 0.5 percent at $1,519 a tonne.
"Clearly, the markets perceive the cuts as being in the wrong place at the wrong time. The US is already a net importer of aluminium so the extra tonnage is arguably needed here," INTL FCStone analyst Edward Meir said in a note. "But where it is not needed is China, and here, output is not being cut at a fast enough clip (if at all) to have a significant impact on the redressing the market's imbalance." Zinc rose 0.6 percent to $1,694 a tonne, lead slipped 0.7 percent to $1,686 and tin gained 0.2 percent to $14,850. Nickel hit a four-week low of $9,890 on worries about demand from Chinese stainless steel mills and high stocks. It ended down 1.7 percent at $9,950.
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