Copper edged down on Friday as the dollar strengthened and physical buyers held back owing to high prices, traders and analysts said. Copper for three-months delivery on the London Metal Exchange hit an intra-day low of $8,430 before paring some losses to close at $8,570 per tonne, down $40 from Thursday's close.
"Copper has been tracking the dollar again," said David Thurtell, metals analyst at BNP Paribas. The dollar jumped to a seven-week peak against the yen and pulled further away from record lows against the euro after first quarter results from Citigroup contained less damage from the crisis in the credit markets than some had expected.
A stronger dollar makes metals, which are priced in dollars, more expensive for investors holding other currencies. "(Copper's) performance was poor yesterday. The fact that it traded to a record high and then closed below previous days' levels signalled the rally was getting a bit tired," analyst Michael Jansen at J.P. Morgan said.
The metal, used in construction and wiring, touched a record high of $8,880 on Thursday. Thurtell said relatively bullish industry news may have helped base metals recover some early losses. Zambia's state power utility ZESCO Ltd has asked copper and cobalt mines to scale down their operations as it plans a 48-hour shut down at a major plant for maintenance.
Kazakhstan may impose a metals export duty to raise budget revenues, triggering a barrage of criticism from key industry players in the resource-rich nation. Ecuador will suspend large-scale mining exploration projects while a new mining law is approved to regulate the country's nascent sector. Also, a strike at the world's biggest producer, and low levels of stockpiled metal, underpin copper prices.
"This week's (copper) rally is obviously driven by the strike at Codelco," said economist Stephen Briggs at Societe Generale. Chilean subcontract workers at state-owned Codelco began a company-wide strike on Wednesday over pay and work conditions, causing the firm's Salvador and Andina divisions to shut down.
Codelco said output at those two divisions remain paralysed due to a strike. Andina produced 218,000 tonnes and Salvador produced 64,000 tonnes of copper last year.
Traders on the LME floor said the market was nervous and volumes were low, which made it easy for prices to fluctuate. "Until there's confidence I think most people will stay away from the market...But we might aim for a higher close," an LME trader on the floor said.
The low level of inventories in the copper market makes it vulnerable to supply shocks. LME stocks were down by another 2,325 tonnes to 114,200 tonnes - less than three days' of global consumption. The stocks have almost halved since the start of this year.
In other metals, tin rose $325 to $21,675, in sight of the record high of $21,750 per tonne it hit on Thursday. Worries about reduced supply from Indonesia, the world's second largest producer of the metal, supports tin prices.
Zinc dropped $32 to $2,280 per tonne from Thursday's close of $2,312. Aluminium was $15 higher at $3,075 per tonne while lead rose $25 to $2,835 and nickel was at $28,805 from $29,250.