Copper climbed more than 1 percent on Tuesday as the euro rose against the dollar on hopes European leaders will cobble together a deal to prevent Greece from defaulting, but concerns about demand prospects remained. Benchmark copper on the London Metal Exchange traded at $9,124 a tonne at 1457 GMT, paring losses after falling nearly 1 percent to $9,005 in the last session.
The metal used in power and construction was still more than 10 percent down from February 15, when it hit a record high of $10,190 a tonne. "All eyes are on the Greek vote of confidence in Papandreou...I think people are still hoping for the best rather than fearing for the worst," said analyst Leon Westgate at Standard Bank. "Everything appears to be related to the bounce in the euro. It's a bit of a relief rally that has triggered some short covering," he added.
Risk appetite improved in wider markets and the euro rose for a fourth session on optimism Greek Prime Minister George Papandreou would survive a confidence vote on Tuesday that could help avert a default on the country's debt. A softer US currency makes dollar-priced commodities more affordable for holders of other currencies.
Other economic news was also supportive. Sales of previously owned US homes fell less than expected in May, data showed. On the fundamental front, worries over demand lingered after data showed that refined copper imports to top consumer China dropped 6.9 percent in May to a 30-month low after falling 16.6 percent in April.
"We hope that Chinese demand will increase in the second part of the year but until we see premium prices significantly up copper will not trade much higher," said Andrey Kryuchenkov of VTB Capital. "Chinese imports went down as expected because the refined domestic production was on the rise, stocks were very high and the arbitrage (Shanghai-London) was closed," Kryuchenkov said.
Copper open interest on the LME has in general declined sharply since mid April. Since early May the drop has combined with steady or rising three-month prices which suggests that short-covering has been a market feature. It's possible that traders are pricing in lower prices as the summer lull in factory activity takes hold, analysts said. "The traditionally slower summer period along with reduced demand from Japan as industrial consumption has yet to rebound following the earthquake is limiting any bullish sentiment," RBC Capital said in a note.
Inventories of copper in LME-monitored warehouses rose to 472,825 tonnes but were 1.3 percent down from Jun. 9, when they hit a more-than-one-year high at 477,925 tonnes. Aluminium traded at $2,555 from $2,531 at the close on Monday. The metal used in packaging and transport fell by about 10 percent since May 3, when it hit a 9-month high of $2,803. In its latest report, Barclays Capital recommended taking a long trade in aluminium.
Aluminium prices are directly influenced by oil prices as oil represents a main cost for the energy-intensive metal. Zinc, used in galvanising traded at $2,225 from $2,172 on Monday's close. Battery material lead traded at $2,480 from $2,450 and tin at $25,300 from $24,800. Nickel traded at $22,090 from $21,650.