Copper rose on Friday, on the back of a weaker dollar and rising equities, but demand and economic concerns capped greater gains with China's restocking seen coming to an end. London Metal Exchange copper for three-months delivery closed at $5,025 a tonne compared with Thursday's $4,970 a tonne.
"Short-term on a day-to-day basis, the dollar does have an impact," said Neil Buxton, managing director of GFMS Metal Consulting. "(While) any correction in the summer months due to a lull in Chinese imports will be a relatively short-lived move."
"Most of the indicators are pretty positive for copper ... it's more to do with the supply side and a structural tightness to the market reflecting the lack of investment." Copper has dropped around 8 percent since hitting an eight-month high of $5,388 a tonne last week and analysts say prices have run ahead of fundamentals and the market needs to see more impressive macroeconomic data to extend gains.
"Purely from a fundamental perspective, I'd expect prices to come off this summer but one significant caveat is the dollar," said Eleni Joannides, a metals analyst at CRU Group. Copper has gained more than 60 percent this year, boosted by demand from China, the top consumer of the metal and falling inventories, which currently stand at 280,350 tonnes, the lowest since November last year.
Aluminium was one of the strongest performers of the whole complex. It rose $37 to end at $1,679 a tonne, after inventories of the power-intensive metal fell 2,850 tonnes. "The nearby spread has tightened and physical premiums have risen as availability for the nearby material has gotten tighter," analyst Gayle Berry at Barclays Capital said. The short-term tightness in aluminium supplies are partly because companies with metal are using it as collateral to release cash tied up in stock, analysts and traders said on Thursday.
Concerns about shortages, despite record high stocks, are reflected in the narrowing contango - the discount for cash material over the three-month contract - at around $30 a tonne compared with levels around $35 a tonne on June 1. Zinc closed at $1,576 from $1,563, while battery material lead ended at $1,695 from $1,675. Nickel closed at $15,200 from $15,005, while tin was last bid at $14,800 versus $14,850.