Copper fell on Tuesday along with a drop across the commodities complex as weak US data and a rising dollar against a basket of currencies weighed on markets. Benchmark copper on the London Metal Exchange closed at $8,799 a tonne versus $8,840 on Monday.
The metal used in power and construction hit its lowest in more than five months at $8,504.50 last week and stands some 12 percent below record highs of $10,190 in February. "You would expect a little bit of disappointment with industrial production weaker, with the housing numbers," said Nic Brown, head of commodities research at Natixis.
"The base metal prices to a certain extent will be following the rest of the commodities spectrum, where you have energy prices suffering today, precious metals prices suffering," Brown said. Gold reversed course to fall and oil prices slid. World stocks fell to a one-month low.
Earlier, copper rose partly due to signs of a long-awaited return of Chinese end users, analyst Stefan Graber of Credit Suisse Private Banking said. "Shanghai warehouses have registered significant outflows in copper and aluminium (from) late March. Also the LME-SHFE spreads have tightened a bit," he said. LME copper stocks grew by 500 tonnes but cancelled warrants, the metal tagged for removal from warehouses, are trending up in Asia.
Shanghai copper stocks have dropped by around 40 percent since mid March, while the price differential between the LME and Shanghai Futures Exchange narrowed in May. "The Shanghai copper forward curve and the SHFE-LME price differential point to some early signs that the Chinese copper market is tightening up," added Macquarie. "We recommend scale-down buying of the dip."
Global copper production is set to rise in the next two years, leading to a surplus which will put pressure on prices in 2013, said an analyst with consultants CRU Group. The price to roll an LME aluminium short position for tomorrow/next day delivery shot up to $7 on Tuesday, its highest since mid-March, reflecting an absence of available metal for delivery on the May third-Wednesday prime prompt date.
It later eased to $2.97. Financing deals are estimated to have tied up about 70 percent of record high LME aluminium stocks at above 4.70 million tonnes. These deals, many made by banks and merchants in the aftermath of the credit crunch in 2008, have locked metal up in long-term rent agreements. Aluminium fell to a two-month low of $2,500 before ending at $2,501 a tonne from $2,547. Tin earlier hit its lowest since January at $27,400 a tonne. It was untraded at the close but bid at $27,875 a tonne from $28,000, while zinc closed at $2,091 from $2,155 on Monday's close.
"The moves by aluminium and tin will be closely watched in the coming days as they are the two metals that still have a reasonably sized, speculative long commitment," RBC Capital said in a note. Battery material lead ended at $2,309 from $2,283 a tonne and nickel closed at $24,150 a tonne from $24,355.