MELBOURNE: London copper steadied on Tuesday from a near one-month low hit in the previous session as investors bought on dips, aided by prospects of a tighter market and rising inflation next year.
Three-month copper on the London Metal Exchange was little changed at $5,490 a tonne by 0711 GMT, down 0.1 percent, following a 2.5 percent loss in the previous session, when it hit its weakest since Nov. 21 at $5,459 a tonne.
Prices have slipped 5.5 percent so far this month, eroding a 20 percent rally in November that helped break a three-year bear trend this year.
Spooking some in the market, LME copper stocks have surged 62 percent or about 130,000 tonnes in the past nine days, LME data showed, reaching 345,475 tonnes, the highest in two months.
Most of the influx came last week, as December's third Wednesday rolled around. Metal is typically delivered against short positions during the prime prompt date in December so traders don't have to hold expensive positions over the year-end.
"Sizeable hidden copper stock builds in the ex-China market could weigh on prices," Standard Chartered noted last week.
"We estimate almost 500,000 of unreported cathode stock build since July ex-China and 375,000 for the year-to-date. Unless China's refined import demand picks up significantly, this metal could eventually be delivered into LME warehouses in Q1-2017."
The surge in inventories echoes a sharp jump in cancellations, that is stock to be pulled out of warehouses, in early to mid-October. The jump in LME inventories suggests this metal was not shipped to China but remained in warehouses in Asia, a warehouse source said.
Still, with investor positions on the CME at record highs on prospects that incoming U.S. President Donald Trump will boost the economy by spending on infrastructure while China's economic recovery gains ground and a supply surge fades out, some investors were using the pullback to buy, a trader said.
"(Copper) feels it's a buy on dips for sure although might drift lower into year end."
Shanghai Futures Exchange copper fell 2.6 percent to 44,890 yuan ($6,458) a tonne.
China's economic growth is expected to cool in 2017 as its top leaders flag tighter monetary policy and further curbs to clamp down on asset price bubbles, especially in the property market, even as a sharp drop in the yuan has fed fears of markets turmoil.
In other metals, LME zinc and lead, among this year's best performers in metals, both stretched a decline as profits are booked ahead of the year end, falling by around 1 percent.
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