Copper touched a 13-month high before reversing gains in late trade on Monday, as a firmer dollar offset data showing hefty imports of the metal into China. Copper for three-months delivery on the London Metal Exchange closed at $6,613 a tonne, from a close of $6,649 on Friday.
The red metal, used in power and construction, earlier rose to $6,732, its highest since late September 2008. China reported a near 30 percent rise in copper imports in September to 282,828 tonnes, fanning bullish sentiment that the world's biggest copper consumer would continue to draw in metal at a phenomenal rate. September's inflow was the fifth highest on record.
"The Chinese copper data was very positive and anything that is positive in copper tends to ripple out across the other metals," said David Wilson, director of metals research, Societe Generale. "Consumption in China is racing ahead." "But the (firmer) dollar would take some of the wind out of copper's sails," he added. "Investors are using dollar denominated commodities to cover fears of dollar weakness and inflation."
Despite the increase, some analysts remain concerned about rising LME stocks, which at 368,850 tonnes are at their highest since mid-May. Latest data showed LME stocks rose 1,775 tonnes. For graphics showing global exchange metals stocks, China's economic growth is likely to speed up this quarter, but the government will stay the course on its fiscal stimulus and loose monetary policy, senior officials said on Monday.
Earlier, the dollar dipped to a 14-month low against the euro after a Chinese report said Beijing should increase its holdings of euros and yen in its foreign reserves. The US currency has shed about 7 percent against a currency basket so far this year, supporting dollar-priced commodities by making them cheaper for holders of other currencies.
And despite firming later in the session to weigh on industrial metal prices, analysts see further currency related direction in commodity markets. "While we continue to remain bearish on the dollar's longer-term prospects, we suspect that we are quite oversold in the short term," MF Global said in a note.
"We therefore would be wary about chasing this current bounce in metals, enticing as it looks on many of the charts." Analysts also said the labour dispute at Chile's Spence mine was supporting copper prices, although falling equity markets helped stoke lingering economic concerns.
Sentiment has also been boosted by some supportive macroeconomic data, including Friday's upbeat US existing home sales and bigger-than-expected rise in new industrial orders in the Eurozone in August. Aluminium closed at $1,998 from $1,972. The metal used in transport and packaging touched a day's high of $2,028, its highest since late August.
Zinc closed at $2,315 from $2,273, having earlier touched $2,365.75, its highest since May 2008. It is on course for a 20 percent rise this month, its strongest since October 2006. The metal, which jumped over 10 percent last week, saw continued support from an outage at Chinese-owned Century zinc mine in Australia after the failure of a pipeline carrying concentrate from the mine to port. Repairs were expected to take another two or three weeks. The operation also reported a 9 percent fall in output in the September quarter due to a change in the mine plan.
FOR MORE ON ZINC, CLICK ON Battery material lead was untraded in LME rings but was last bid at $2,310 from $2,360, while tin was at $15,255 from $15,145. Nickel closed at $18,650 from $18,950.