Copper rose on Wednesday, taking its cue from a weaker dollar and climbing stock markets, but poor data from Japan and the United States kept economic and demand concerns alive.
Three-month copper on the London Metal Exchange rose by more than 1 per cent to trade at $4,600 (U.S.) a tonne at 0913 GMT from $4,550 a tonne the day before.
“Metals are taking their cue from the weaker dollar and...stock markets have held reasonably well considering the housing data,” said analyst Robin Bhar at Calyon.
But European shares weathered the downbeat data, helped higher by energy shares. A weaker dollar also aided industrial metals, making material priced in dollars cheaper for holders of other currencies.
Pressuring sentiment, Japan's economy shrank at a record pace in the first quarter and U.S. housing starts and permits fell to record lows in April, tempering recent market speculation that the recession-plagued global economy has seen the worst.
“This was another reminder for the construction-sensitive sector that we are not out of the woods yet and that, despite robust interest from China, the global economy is very far from a full recovery,” Andrey Kryuchenkov, commodities analyst at VTB Capital in London, said in a note.
A fresh fall in stocks of copper, used extensively in the power and construction industries, helped offset some demand concerns, with stocks down 7,350 tonnes to 341,475 tonnes.
However, cancelled warrants – material earmarked for delivery – fell, raising questions about buying by China, the world's largest consumer of copper.
Investors now fear Chinese demand, that has helped copper to double in value so far this year, was merely government and consumer stockpiling that is now starting to subside.
The material tagged for delivery stood at 50,325 tonnes – about 15 per cent of total LME copper stocks – compared with 57,700 tonnes on May 18.
Copper also faces headwinds ahead of a traditionally quiet market period as the Northern hemisphere summer approaches.
“As we go into the weaker third quarter and demand begins to subside we should drift further down towards the lower $4,000 level for copper,” Mr. Bhar said. “So, steady as she goes.”
Aluminum stood at $1,502 a tonne from $1,500, with prices restrained by an over-supplied market that saw inventories march higher yet again, up by 81,075 tonnes to strike a record above 4.1 million tonnes.
The metal used in transport and packaging hit a session low of $1,494, its lowest since the end of April.
Zinc was at 1,523.75 from $1,526 and battery material lead was at $1,497 from $1,485. Helping to buoy prices, latest data shows a dominant position is controlling 80-90 per cent of cash warrants on LME stocks of lead.
Tin was at from $13,690 from $13,625 the day before.
Worries about a supply squeeze were reflected in the premium of nearly $200 a tonne for cash material over the three-month contract. But that is expected to fall as a dominant position, which has recently controlled up to 90 per cent of cash warrants on LME stocks, has slipped to between 40 and 50 per cent.
