Copper hit its highest level in nearly two weeks on Wednesday due to a weaker dollar and ongoing draw downs in exchange stocks of the metal, but a slowdown in demand in top consumer China capped gains. The US dollar index hit a three-week low, with analysts pointing to debate around the G7 summit regarding the speed of the dollar's rise. A weaker dollar makes dollar-priced metals cheaper for non-US investors.
London Metal Exchange copper stocks have fallen to 308,025 tonnes, their lowest in three months, while Shanghai Futures Exchange stocks are at 145,383 tonnes, their lowest since early February. "Copper is looking for direction. It will go up and down depending on dollar etc, but it's still unclear where it's heading," Caroline Bain, senior commodities economist at Capital Economics, said. "The hope is that (China) stimulus will feed through to physical demand and we think it will in the second half, but for now there's no sign of it."
Economists at China's central bank predict a pick-up in the world's second-biggest economy during the next six months. But for now, copper demand in China is weak. China's copper imports fell 16.3 percent in May from the previous month, hitting a three-month low. Three-month copper on the London Metal Exchange ended up 1 percent at $6,028 a tonne, having earlier hit its highest since late May at $6,083.50 a tonne. The metal gained nearly 2 percent last week, but fell for the three weeks prior to that.
Investors have slashed bets on higher copper prices, latest LME data showed, with the net long money manager position slumping by nearly 50 percent in the past three weeks, according to BNP Paribas. Elsewhere, data showed the US economy was probably not as weak as has been reported in the first quarter. But US consumer confidence fell to its lowest level this year in June. In other metals, China's exports of semi-manufactured aluminium are set to ease due to a sharp correction in global premiums, which will tighten the market outside China and eventually support LME prices, Standard Chartered said in a note.
Aluminium ended up 0.5 percent at $1,759 a tonne, having earlier hit its highest since late May at $1,774. "Falling premiums during May weighed on export economics for semis and we believe this will constrain export flows in mid-2015," the bank said. "If China's semis exports do moderate over the next few months ... (it) would also point to LME prices outperforming ShFE."
Zinc ended down 1.1 percent at $2,136 a tonne, with LME data showing stocks rose a hefty 9,000 tonnes to 450,450 tonnes. Nickel ended up 0.8 percent at $13,600 a tonne, having earlier hit its highest since May 19 at $13,680 as LME stocks continue to edge off recent record highs. "Nickel has perhaps come a bit too low and that's why (it's)correcting. If stocks start declining that's definitely supportive," Jens Pederson, analyst at Danske Bank, said. Lead ended down 0.4 percent at $1,923 a tonne, having earlier hit its highest since late May at $1,966 a tonne, while tin ended up 0.8 percent at $15,375 a tonne.