Copper steadied on Monday as high oil prices threatened to derail a fragile global economy and investors fretted about how Europe would fund its mountain of debt, but a supply stoppage at an Indonesian raised new supply worries. A weekend meeting of the Group of 20 leading economies failed to reach agreement on making more funds available to Europe and said EU leaders must commit more money to fight the debt crisis at their summit this week.
The comments piled pressure on Germany to drop its opposition to a bigger European bailout fund. Benchmark copper on the London Metal Exchange closed at $8,536 a tonne, little changed from $8,530.50 at the close on Friday, when it posted its strongest week since mid-January.
Copper has risen more than 11 percent so far this year but has struggled to climb further as poor demand from top consumer China and a debt-strained Europe counter upbeat US economic data. "We had a good run-up last week after the Greek bailout was agreed but the markets are now shifting their focus towards the debate over the size of the European fund," said metals analyst Edward Meir at INTL FCStone.
"It is also important to keep an eye on Brent oil prices; as it has got the potential to slam all other commodities. If it moves $10 higher it starts to become quite serious because you get inflationary pressures and rising input costs for metals." Freeport McMoRan Copper & Gold Inc's has told workers at the mine not to work due to safety concerns linked to labour unrest, a union official said on Sunday.
"The supply side is very strained; we are not getting more material out but the focus currently remains on demand," Meir said. Also helping market sentiment, data from the US showed signed contracts for US home resales rose to a nearly two-year high in January, giving further evidence of a budding recovery in the housing market of the world's largest economy.
Weak demand from top metals consumer China however, was undermining investor appetite for copper. "China is probably stockpiling, and demand in China, by Chinese standards, is relatively weak at the moment, (so) it becomes harder to justify these price levels," said BNP Paribas strategist Stephen Briggs. Highlighting weak Chinese physical demand, at the end of last week stocks in Shanghai warehouses remained near levels last seen in 2002, at more than 216,000 tonnes.
That was in contrast to LME stockpiles, where the latest data showed stocks down at 300,475 tonnes, their lowest since August 2009, of which 212,650 tonnes are available to market, equivalent to 3.8 days of global consumption. China's National Bureau of Statistics was scheduled to release the official manufacturing activity number on Thursday, and if it confirms last week's poor HSBC flash data reading, copper may be prone to some selling.
Packaging metal aluminium closed at $2,331 from $2,328, with most of the near record 5.1 million tonnes of LME stocks still tied up in financing deals and not available to the market. Soldering metal tin finished at $23,705 a tonne from $23,850 and zinc, used in galvanising, at $2,100 from $2,080. Battery material lead closed at $2,247 from $2,208, while stainless steel ingredient nickel finished at $20,175 from $20,175.