Copper eases

Copper eased on Friday as continued concerns about slow demand from the metal's top consumer, China, and a stronger dollar kept prices under pressure. Benchmark copper on the London Metal Exchange (LME) closed at $8,580 a tonne, down 0.60 percent from Thursday's close of $8,630 a tonne. The metal earlier hit a session high of $8,670 a tonne, not far from the year's peak of $8,765 reached in early February, although volumes were thin going into the weekend.
Copper has gained more than 13 percent so far this year, but demand from China - which consumes 40 percent of the world's copper - has yet to pick up strongly after the Lunar New Year in January, raising worries that prices could retreat sharply. Data released on Thursday, which showed an index measuring China's manufacturing activity at a five-month high, served to moderate some of the concerns about an economic slowdown.
Analysts said the direction for the weeks ahead will be driven by macroeconomic data and investors will look for signs of any increase in copper demand from China. "Market players in the base metals market are focusing on macro factors," said Commerzbank analyst Daniel Briesemann. "They are now waiting for China's economic data and copper import data for more clues but today the dollar is putting a peg on the uptrend we have seen in the last few days."
A drop in the euro versus the dollar, hurt by lingering concerns about the euro zone debt crisis, weighed on base metals. A strong dollar makes commodities priced in the US unit more expensive for holders of other currencies. Some analysts said copper will remain trapped in narrow ranges unless Chinese demand perks up. "Copper is a flat story at the moment. Chinese demand used to be the driver, but now it looks like it's a dragger," said Henry Liu, head of commodity research at Mirae Asset Securities in Hong Kong.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 2.5 percent to 221,487 tonnes, weekly data from the exchange showed on Friday, the highest level since August 2002. "Growing inventories in Shanghai have probably something to do with the Chinese New Year holiday but this still shows that China imported more material than it actually needed in the last few months and this might lead to lower imports in the next few month," Briesemann said.
"However, lower imports should only be temporary because China will have to import high levels of raw materials in the medium-term if it wants to go ahead with its social building plan." Meanwhile, copper stocks in warehouses monitored by the LME fell to a 2-1/2 year low of 289,000 tonnes, down 3,250 tonnes, with the ratio of cancelled warrants to total stocks at 34.31 percent, with most of the tonnage in US locations.
In other metals, aluminium closed at $2,328, from Thursday's close of $2,353 a tonne. Zinc ended at $2,119 from Thursday's close of $2,105 a tonne while lead finished at $2,183 from $2,163 a tonne. Tin finished at $23,725 from a close of $23,775 and nickel closed at $19,450 from $19,500.