Copper and zinc pulled back from their highest levels in more than four months on Monday, weighed down by a firmer dollar and as misgivings surfaced over China's ability to shore up economic growth. Three-month copper on the London Metal Exchange slipped 0.5 percent to close at $5,000 a tonne, handing back some of last week's rally, but off an earlier low of $4,940.
Chinese authorities gave assurances at the weekend that the top metals-consuming country would not experience a hard landing. "Even in the metals (like aluminium and zinc) where the supply reaction was fairly aggressive, fundamentals have not improved sufficiently to justify higher prices," J.P. Morgan analyst Natasha Kaneva said in a note.
Speculators have switched to a net-long position in copper futures, the latest US data showed, while fresh longs have also appeared on the LME with rising prices and open interest at its highest since June. "People are fixing the profit on their long positions and then after today's smallish pullback, I think people will be positioning themselves for a rebound this week," said Sergey Raevskiy, analyst at investment bank SP Angel.
Weighing on the metals markets was a firmer dollar as the likelihood of a US recession diminished, making commodities priced in the US currency more expensive for buyers outside the United States.
Zinc slid 2.5 percent to close at $1,811 a tonne after LME inventories rose 5,200 tonnes to 470,700 tonnes, highlighting an overhang of stocks on the market. The galvanising metal is the second-best performer on the LME this year as bullish investors expect shortages after the closure of major mines, but some are wary about high inventories.
Tin was the standout performer, rising 2.1 percent to $17,350 a tonne, its best level in a year as investors worried about lower exports from major producer Indonesia and reduced inventories. Gianclaudio Torlizzi, partner at Milan-based metals consultancy T-Commodity, said that tin's rise was driven by strong fundamentals and technical signals, and could reach $20,000 a tonne by the end of the year. Aluminium finished up 0.8 percent at $1,599.50, lead added 0.2 percent to end at $1,870 and nickel rose 0.4 percent to $9,380.