Copper climbed above the key $8,000 level on Friday, touching an 8-week high, but analysts said worries about Chinese demand and economic growth in the United States could cap further gains. Stronger sentiment in base metals and equity markets helped London-listed miners up. BHP Billiton and Xstrata, Kazakhmys and Rio Tinto all gained between 1-2 percent.
Three-month copper on the London Metal Exchange hit $8,025 a tonne, its highest since July 31 but trimmed gains on profit-taking and closed at $7,880, down $10 from Thursday. In New York, copper for December delivery settled down 0.20 cent to $3.5925 a lb on the New York Mercantile Exchange's COMEX division, after dealing between $3.5640 and $3.6550, its priciest level since July 24.
"What we see is a little bit of profit-taking ahead of the weekend," analyst Leon Westgate at Standard Bank said. Copper, used extensively in the power and construction industries, is up about 4 percent since the US Federal Reserve on Tuesday moved to shore up economic confidence by slashing benchmark interest rates by 50 basis points.
"We've seen people pricing in euphoria after the Fed cut," said John Reade, analyst at UBS. "We've run up too far in some things like copper, nickel and maybe lead ... We're seeing developed world growth estimates coming down."
Economists have revised down economic growth estimates for the United States and other Western countries after the subprime mortgage market slump and the credit freeze, but they still expect emerging market countries' growth to be strong.
Also in the near term copper could come under pressure from sales by Chinese importers keen to re-export after price gains of about 9 percent in the London market in the last two weeks.
"Chinese offtake seems to be subdued at present, in part because of destocking," Calyon said in a research note. "Given that underlying copper demand remains healthy, we expect that Chinese copper imports and consumption should be strong through the fourth quarter of this year."
Over the last couple of days, focus in the base metals markets has shifted to demand, supplies and stocks. US Federal Reserve chairman Ben Bernanke reinforced negative sentiment on Thursday when he said financial losses stemming from disarray in the US subprime mortgage market "far exceeded even the most pessimistic estimates." That, analysts say, is bad news for aluminium, which is most at risk from economic slowdown in the United States, where demand has tumbled with the housing market.
Rising supplies from China, which has been ramping up capacity, also have taken their toll, while an influx of material into LME warehouses has underscored the bearish outlook for aluminium prices. Funds have added to aluminium's losses by taking on large short positions which aim to benefit from falling prices. Aluminium closed at $2,407 a tonne from $2,442 on Thursday when the LME price reached $2,494.
Lead jumped to $3,390 a tonne from $3,255 as the market, worried by news of a dominant position in LME stocks, scrambled for limited supplies. It closed $95 higher at $3,350. The premium for cash metal over the three-month contract has jumped about $20 since Thursday to $65 a tonne.
According to LME data, 50-80 percent of stocks on warrant were held by a single party. Currently, LME stocks of lead stand at 21,425 tonnes with 20,275 tonnes on warrant. Nickel was softer at $32,300 a tonne from $32,600 on Thursday, zinc at $2,879 from $2,904 and tin gained to $15,300 from $15,250.
The governor of Indonesia's Bangka Belitung, the country's key tin-producing islands, has issued a decree imposing sales quotas that could decrease tin exports, according to a document seen by Reuters. Indonesia is the world's second largest tin producer.