Copper rose on Wednesday after sharp falls in the previous session as the dollar pared gains after disappointing US housing data, although evidence of slower growth in China's demand for commodities restrained gains. Three-month copper on the London Metal Exchange closed at $8,455 from a close of $8,430 on Tuesday, 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. The unexpected fall in home resales in the United States, the world's largest economy, underscored the many hurdles for the broader economic recovery.
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 although they were 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.
The dollar trimmed earlier gains against a basket of currencies, putting pressure on base metals. A weaker dollar makes commodities priced in the US unit less expensive for holders of other currencies.
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.
Lead closed at $2,044 a tonne from Tuesday's close of $2,013, and zinc at $2,020 from $2,036. Aluminium closed at $2,209.5 a tonne from $2,245, and nickel at $18,805 from $19,050. Tin ended at $23,000 per tonne from Tuesday's close of $23,420.