Copper rose on Wednesday, adding to gains from the previous session when it rallied more than 3 percent on strong Chinese import figures, but further gains were capped by a weak euro and concerns about the eurozone's growing debt crisis. Three-month London Metal Exchange (LME) benchmark copper ended at $7,785 a tonne, up 0.5 percent from $7,745 at the close on Tuesday.
"I wouldn't be too excited about metals at the moment. Copper has been rangebound for the last few weeks with the upside capped around the $8,000 level. It's all about the eurozone debt crisis," said Andrey Kryuchenkov, analyst at VTB Capital. Investors were encouraged by data on Tuesday showing a surge in China's copper imports for December, raising expectations that demand from the metal's top consumer could improve. "People were a little bit surprised yesterday by the strength of the Chinese imports, particularly in copper," Natixis analyst Nic Brown said. "Our overall view on China demand for copper this year is that it's going to be good."
China's offices and exchanges will be shut in the last week of January for the Lunar New Year holidays, with Chinese consumers holding back purchases ahead of the holiday season. "In the coming weeks the market is expected to be a bit quiet because the Chinese will be off for the Lunar New Year so we are likely to continue to trade off news about the eurozone debt crisis," Kryuchenkov said.
Looking further ahead, copper could touch record levels near $10,000 a tonne by the end of the year, according to the chief economist at trading house Trafigura, with tin seen rising to $25,000 to $30,000 a tonne by year-end while zinc could hit $2,400 to $2,500 a tonne.
Chinese imports of aluminium also rose last month, and this has helped support aluminium prices, as has news of production cuts. Norway's Norsk Hydro became the latest aluminium producer to cut production due to economic uncertainty and high costs, announcing plans to curtail output at a plant in Australia.
Last week, Alcoa Inc, the largest US producer of aluminium, was the first to announce a cutback in response to steep aluminium price falls, slashing annual global smelting capacity by 12 percent. This could signal cuts at China producers too. "A substantial chunk of the industry (in China) is likely to be in negative territory given where prices are at the minute," Brown said. "Plus you've got the emphasis on environmental policies, energy intensity policies, so we think there is pressure to constrain Chinese output of aluminium." However, there are still plentiful inventories of aluminium in warehouses, keeping a lid on further rises in the price of the metal.
Three-month aluminium ended at $2,165 a tonne, from $2,164 at the close on Tuesday. Credit Suisse said more evidence than the Chinese import data was needed before a bottom in base metals prices could be confirmed. "For now, technical momentum remains largely negative across the sector," it said in a note. "However, the latest positive performance coupled with the improved sentiment mark a good start." Tin ended at $20,475 from $20,275, zinc at $1,936 from $1,930 while lead was at $1,990 from $1,989. Nickel closed at $19,450 from $19,505.