LONDON: Copper steadied on Wednesday after sharp falls in the previous session, as support from a weaker dollar and a budding economic recovery in the United States offset worries about slower growth in China's demand for commodities.
Three-month copper on the London Metal Exchange traded at $8,441 in official rings, up slightly from a close of $8,430 on Tuesday and reversing the previous session's losses when it fell to its lowest since March 9 at $8,383 a tonne.
Copper has risen more than 11 percent this year, but prices have struggled to rise further since they hit the year's peaks above $8,750 early last month.
Demand from top consumer China has been slow to pick up after the Lunar New Year, raising worries that prices could retreat sharply. Imports of refined copper into China had soared to a record of 406,937 tonnes in December from a year earlier, but inflows have slowed since then.
China's inflows of refined copper rose 12 percent month-on-month in February but below December's record.
But China's apparent demand for refined copper slumped 12.5 percent in February as imports slowed and stockpiles held at the Shanghai Futures exchange grew, Reuters calculations based on official Chinese data showed.
"China is the most important player for the copper market as it accounts for 40 percent of global consumption. Fundamentally, it's not balanced at the moment because we don't have the drive from China," said Andrey Kryuchenkov, an analyst at VTB.
"For sustained gains for copper from here, you will need China to drive this market higher. If not, copper is likely to be stuck in its current range for a while longer."
The metal has traded in a range between around $8,200 and $8,700 since early March.
Helping lift metals was a rise in the euro against the dollar on signs Greece's rescue was progressing smoothly after the country's lawmakers approved its second bailout as expected.
A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
An improving economic backdrop in the United States also helped underpin the demand outlook for industrial metals, following a string of upbeat data from across the Atlantic in recent weeks.
HIGH CHINESE INVENTORIES
High base metals inventories in China remain a key concern among market participants, even though copper and aluminium stocks at LME warehouses have been declining, Standard Chartered said in a note.
"Rising inventory levels in China suggest that the domestic market remained in surplus in the past week. Although this is negative for metals prices, a seasonal improvement in metals demand going into Q2 should support base metals prices," Standard Chartered said.
"Yet the upside should be limited by a lack of confidence and lacklustre demand in H2."
Stockpiles of the metal in Shanghai's free trade zone have been climbing, two Shanghai-based sources said, further adding to worries about demand.
Bonded stockpiles are expected to hit the 600,000-650,000 tonne mark by the end of the month, they said. This is close to record highs seen this time last year and up from 285,000-300,000 tonnes in mid-January.
In contrast, copper stocks held in LME-registered warehouses have been declining since late last year. The latest numbers showed a 2,500 tonne outflow on Tuesday, bringing inventories to their lowest levels since mid-July 2009 at 258,325 tonnes.
The global market for refined copper is seen in a 101,000 tonne deficit this year, according to a median estimate of analysts polled by Reuters. The 2011 deficit was 358,000 tonnes, in line with 2010, the International Copper Study Group (ICSG) said on Wednesday.
Battery material lead traded at $2,036 a tonne in official rings, from Tuesday's close of $2,013, while zinc , used in galvanizing was at $2,042 from $2,036.
Aluminium was at $2,234 a tonne from $2,245, and nickel traded at $18,935 from $19,050.
Tin was untraded in official rings, but bid at $23,325 per tonne from Tuesday's close of $23,420.
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