Copper rose on Friday, ending the first quarter with an 11 percent gain, as the dollar softened and metal inventories in Asia fell, although fears persisted of weak demand in top consumer China. Benchmark copper on the London Metal Exchange (LME) closed at $8,445 from $8,350 at the close on Thursday.
The metal used in power and construction rallied in January and hit a five-month high at $8,765 in February. It has lost steam since, mainly because of slowing economic growth in China, which accounts for 40 percent of global copper consumption.
Copper has been trading in an $8,100 to $8,800 range in the past few weeks as conflicting signals stymie investors. "Although you do have a market very worried about Chinese demand, metals have been performing surprisingly well," said Barclays Capital analyst Gayle Berry. "I think we will see more range trading for copper unless something convincing sparks a change."
Three-month tin, used widely in the electronics industry, was a star performer, ending the quarter up 19 percent. Nickel was the biggest loser, falling 5 percent. Partially offsetting worries about slowing economic growth in China, US data in the last few weeks pointed to a recovery in the world's largest economy.
Underpinning prices, inventories of copper in warehouses monitored by the London Metal Exchange have been falling in the last six months, signalling improving demand for the metal. After a 2-1/2 month run up, copper inventories in warehouses monitored by the Shanghai Futures Exchange have also started to decline in the past two weeks.
"Falling inventories and strong Chinese imports underscore the positive cyclical picture for most markets," Credit Suisse said in a research note. The release of the Chinese PMI over the weekend will be key for the near term. China's official manufacturing PMI and the final reading for March are due on Sunday.
This data, which previews the country's giant factory sector before official industrial production data, is expected to have dipped to 50.8 in March from a four-month high of 51.0 in February, according to a Reuters poll. In other metals, prices of zinc surpassed lead this month for the first time since September 2011, reversing their traditional relationship. The two metals are currently trading at similar levels, but analysts see fundamentals pushing lead prices ahead once again. "We see lead prices increasing. It has been suffering from short-selling, but I think there is quite a lot of upside potential, particularly because of supply-side support," Berry said.
Doe Run declared force majeure on lead output from the sole US primary producer in Herculaneum, Missouri, following a fire last week that will stop production for up to six weeks. Three-month lead closed at $2,040 from $1,995, and zinc at $2,001 from $2,005. Three-month nickel closed at $17,825 from $17,150.
Tin ended at $22,800 from $22,700, while aluminium changed hands at $2,126 from $2,135. An International Tin Research Institute (ITRI) official said on Wednesday that the global tin market will be in deficit by 10,000 tonnes in 2012, while a lack of new mines will take inventories to very low levels and push prices to record highs.