Copper prices steady

Copper prices steadied on Tuesday, as a tight supply outlook for the metal used in the power and construction sector offset pressure from a weak euro on persistent concerns about the euro zone debt crisis. Three-month copper on the London Metal Exchange ended at $8,360 a tonne, almost flat from a close of $8,365 on Monday.
It earlier hit a session high of $8,402.75, just off the four-month peak of $8,428.50 reached on Friday. Copper's near 10 percent gain so far this month has pushed its relative strength index (RSI) to above 63, within sight of the 70 level which indicates an overbought market susceptible to weakness.
"In the last few weeks the market discounted better economic data out of the US and strong inflows of liquidity by the European Central Bank. However we have now reached technical overbought conditions, leaving the market vulnerable to a pullback," said Gianclaudio Torlizzi, partner at T-Commodity.
"But we are advising our clients to use these pullbacks as an opportunity to get into the market with a long position," he said, adding that he expected the weakness to be temporary. Adding pressure to commodity prices, the euro fell against the dollar on concerns about the outcome of talks to avert a debt default by Greece. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies.
"One of the factors yesterday and today has been the strength of the euro versus the dollar," BNP Paribas strategist Stephen Briggs said. "That currency pair has often been a driver. It is one of the drivers this year and has been a driver particularly in the last day or so."
Copper jumped 1.8 percent on Monday, its sharpest rise since January 12, helped by the euro's surge to near three-week highs against the dollar and China's record imports of refined copper in December. But worries about the euro zone crisis persisted, as euro zone finance ministers rejected as insufficient an offer made by private creditors to help restructure Greece's debts, sending negotiators back to the drawing board and raising the threat of a disorderly default by Greece.
Helping to limit losses, Chinese trade data for December showed last week that apart from lead and tin, imports of all metals rose, with copper inflows reaching a new all-time high. Large stock withdrawals in LME-monitored warehouses and hopes that Chinese demand will stay strong, along with expectations that global production may continue to be hit by disruptions, have combined to lift copper by around 10 percent so far this year.
"Expectations are that the decreasing stocks are a sign of pent-up demand, which should continue as the world economy gears up for a post recession run," RBC said in a research note. The latest data show that copper stockpiles monitored by the LME MCU-STOCKS stood at 342,250 tonnes, the lowest since October 2009, with cancelled warrants at 22.1 percent of total stocks.
"The continued downward trend in LME stocks for copper is helpful," Briggs said, but added: "There must be an increasing concern that this rally is getting a bit overextended, but there isn't anything to stop it at the moment." Trading activity was thin in Asia with many markets, including China, shut for the week-long Lunar New Year holidays. Aluminium ended at $2,239 a tonne from $2,238 at the close on Monday, while zinc closed at $2,125 from $2,059 and nickel ended at $20,600 from $20,305. Tin, closed at $22,190 from $22,150 on Monday, while lead ended at $2,250 from $2,244.