Copper trimmed earlier losses on Tuesday after US consumer confidence data showed a modest rise in August but failed to press higher on the back of persistent nervousness over the pace of global economic recovery. Benchmark copper for three-months delivery on the London Metal Exchange ended the day with a last quote of $7,440/7,445 a tonne, bouncing from an intra-day low of $7,364.50 a tonne and versus $7,459 a tonne on Friday.
Markets were closed on Monday for a UK public holiday. With this close, the metal, used extensively in construction and wiring, posted a modest rise of 2 percent in August, its second monthly gain in a row. "Investors do not seem convinced (about the pace of recovery) and they are looking to see more help from US," analyst David Wilson at Societe Generale said.
COMEX copper hit a 3-1/2 month peak on Monday after the Japanese central bank eased monetary policy. The move followed a speech by US Federal Reserve Chairman Ben Bernanke, who promised to act as needed to bolster the economy. Traders said the dollar extended losses while the US stocks turned positive, two factors which also helped copper prices.
A slew of data this week may help to confirm whether fears of economic slowdown are justified. Friday's nonfarm payrolls are seen down around 100,000 as the US government sheds temporary census jobs. Supporting copper, stocks in LME warehouses, at 398,525 tonnes, are down more than 150,000 tonnes since mid-February and at the lowest level since November.
Aluminium stocks in LME warehouses have also been falling. They now stand at 4.44 million tonnes compared with a record above 4.64 million tonnes in January. However, about 70 percent of LME aluminium stocks are said to be tied up in financing deals, which earn banks higher returns than they would get in money markets and release cash for producers. That is said to be the reason for the large holdings of LME aluminium stock warrants and cash contracts by two entities. This combined with large short positions is why there is a backwardation or premium for nearby material.
The premium for material to be delivered on Wednesday and bought back on Thursday - known as tom/next and often used to lend material to short positions - is now around $1 a tonne Aluminium, used in transport and packaging, closed unchanged at $2,058. Earlier it hit $2,077, its highest since August 20. Boosting sentiment, top aluminium maker UC RUSAL said on Tuesday continued recovery in global markets should generate good opportunities for growth in demand for aluminium as its second quarter profits beat forecasts.
Tin ended at $21,000 from $21,640, and nickel at $20,700 from $21,050. Tin prices hit a two-year high on Friday on the back of ongoing supply constraints in top exporter Indonesia, which have bolstered the metal's price prospects. Zinc was at $2,065 from $2,092, while battery material lead was at $2,070 from $2,090. Both metals earlier hit their highest in more than a week at $2,110 and $2,099.75, respectively.