Copper bounced from a one-month low while zinc and other metals extended losses on Tuesday on uncertainty over the economic recovery in China, the world's biggest raw materials consumer. Chinese shares rose to their highest in nearly three months, helped by a series of policies to aid the country's struggling economy, including plans for debt-to-equity swaps.
But investors in commodities are waiting for signs of a strong pick-up in physical demand for industrial metals. A rally in prices from mid-January to mid-March was over-extended, fuelled by speculators, analysts said. "Certainly some of the data coming out of China has been more positive and we would expect that to consolidate over the next few months," Caroline Bain, senior commodities economist at Capital Economics, said.
"Then we would be looking for price rises that have a more fundamental base, from stronger demand." Three-month copper on the London Metal Exchange fell to an intraday low of $4,751 a tonne, the weakest since March 3, before rebounding to close up 0.3 percent at $4,775.
Copper, which fell 1.5 percent on Monday, has dropped about 7 percent since hitting a four-month peak of $5,131 in mid-March. Zinc was the biggest loser, sliding 2.2 percent to end at $1,812.50 a tonne after failing several times in recent weeks to break above $1,880. "The likelihood of further demand disappointments keeps us relatively cautious," J.P. Morgan analyst Gregory Shearer said in a note. "We may have reached the limits of the rally ... the market believes fundamentals are not yet tight enough to justify prices higher than $1,850."
Nickel rebounded 1.3 percent to finish at $8,480 a tonne after a slide in the previous session sent it to a near seven-week low of $8,245. Lead closed down 1.2 percent at $1,697 after touching $1,695, the lowest since February 26. Also weighing on the metals market was a stronger dollar after strong US economic data. A firmer dollar makes commodities priced in the US currency more expensive for buyers using other currencies. Aluminium fell 0.9 percent to end at $1,522 and tin traded down 1.7 percent at $16,350.