Copper hit a record on Monday on concerns about supply, particularly from top producers Chile, but pared gains to end lower as the dollar rose against the euro after a bigger than expected fall in German industrial data. Tin also hit a record high on worries about supply problems in top exporter Indonesia, but the price later retreated.
-- Tin hits record high on tight supplies Three-month copper on the London Metal Exchange hit a record at $10,160, but closed at $10,045 from $10,050 at the close on Friday. The euro fell against the dollar for a fourth day, knocking the edge off the metal's price as soft German industrial data reinforced the view that eurozone interest rates will remain low for some time.
A stronger dollar makes metals more expensive for holders of other currencies. Still, sentiment remains positive for industrial metals. "The supply side of the copper market looks extremely constrained this year," said Gayle Berry, an analyst at Barclays Capital. "A whiff of any further supply constraint can boost the sentiment, and the potential power problems in Chile exacerbated the situation."
Chile's Energy and Mining Minister Laurence Golborne said last week the country may face an energy squeeze by as early as midyear because of drought and high demand and could resort to rationing electricity. Chile's copper export revenue rose 8.3 percent to $3.73 billion in January from a year ago, the central bank said on Monday. But copper export revenue was down sharply from $4.5 billion reported for December. Chile is the world's top copper producer, mining about a third of global supply.
"The market is mainly driven by funds at the moment. Demand in China is quiet, but funds continue to buy," an LME ring trader said. "There are also some concerns that the cyclone in Australia may cut supply." Xstrata Plc restarted its 300,000-tonne-per-year Townsville copper refinery in Australia, which was shut last week due to Cyclone Yasi, the company said.
Evolution Securities analyst Charles Kernot said the market was awaiting financial results over the next two weeks from the big four global miners: BHP Billiton, Rio Tinto, Anglo American and Xstrata. Top miners are set to report a doubling in profits for the December half, thanks to booming iron ore and copper sales, sparking calls for fat cash returns to shareholders as the major miners run out of take-over opportunities.
"The big four mining groups I'm sure are going to be talking about...what they're going to put into their mining projects, and maybe we'll see quite a lot of copper coming onto the market in terms of new mines coming on stream," Kernot said. Supply constraints were also driving the tin price higher. The metal used in electrical solder hit an all-time high at $31,395 a tonne after Indonesia's state-owned PT Timah, the world's largest integrated tin miner, said refined production fell 10 percent last year.
"The news has certainly helped to compound a very bullish supply-side story. PT Timah is a very large supplier and that helped propel tin prices this morning," Berry added. The Indonesian government will restrict annual tin output to a maximum of 100,000 tonnes if record high prices trigger a scramble for the metal, a senior mining official said on January 28. Three-month tin on the London Metal Exchange was last bid at $31,200, flat from Friday's close.
Falling copper inventories also helped support prices. Stocks in LME warehouses fell 625 tonnes to 393,525 tonnes, data showed on Monday. Copper stocks had risen by over 40,000 tonnes since December 8, raising some concerns about demand. Still, stocks are down dramatically since they touched a 6-1/2 year high in mid-February at 555,075 tonnes.
Aluminium stocks increased by 31,650 tonnes to 4,562,625 tonnes, the highest level since May 2010, latest data showed. "A pick-up in cancelled warrants, ie inventories earmarked for delivery, in both copper and aluminium suggests that the latest inventory build-up may reverse before long," Credit Suisse said in a note. Three-month aluminium was last bid at $2,548 a tonne, from $2,541 a tonne on Friday. Zinc closed at $2,508 from $2,506 a tonne. Lead was $2,580 from $2,584 a tonne. Nickel closed at $28,300 from $28,350 a tonne.