Copper slipped in erratic trade on Tuesday, as the dollar gyrated around 15-month lows against a basket of currencies, while nickel fell to a seven-week trough on a poor stainless steel demand outlook. Investors remained mostly on the sidelines ahead of key imports data from China, the world's top consumer of copper. In the absence of fundamental drivers, prices eyed equity and currency markets.
Copper for three-months delivery on the London Metal Exchange closed at $6,530 a tonne, slightly down from $6,540 on Monday. "Chinese data later this week will definitely be something that will would give clues for nearby direction (of the market)," said Michael Khosrowpour, an analyst at Triland.
China's October imports of unwrought copper and semi-finished copper products are expected to fall after an unexpectedly strong inflow in September, hit by poor margins for spot imports and delays to contracted shipments. "Given the price incentive to import copper into China on an arbitrage basis has broadly disappeared in recent months and stocks have risen in the region...the domestic market appears plentifully supplied," Barclays Capital said in a note.
Also, casting shadows over the demand outlook, was the rise LME copper inventories since July. Stocks last climbed 4,675 tonnes to a 6-month high of 394,150 tonnes. Copper inventories in Shanghai rose to their highest in five and a half years last week.
Traders say the Chinese demand is likely to see Codelco raise term copper premiums to the country for next year, after lifting them for Japanese and South Korean customers. Among other industrial metals aluminium was at $1,960 from $1,952. Aluminium prices should remain weak into 2010, with smelters expected to restart some idled production capacity despite a surplus already overhanging the global market, a Bank of America Merrill Lynch research note said.
Zinc was at $2,161 from $2,160 and battery material lead was at $2,288 from $2,300. Tin traded at $14,825 from $14,750. Nickel prices fell to a seven week-low of $16,800 a tonne on concern that stainless steel mills were cutting back production. The metal closed at 16,825 from Monday's $17,430.
"Stainless steel producers in China have probably backed away in the market," Citi analyst David Thurtell said. "Stainless steel demand in the last month or two has fallen away a bit...but world demand should pick up so nickel's downside from here should be relatively limited." About 60 percent of global nickel production is used by stainless steel producers.