Aluminium rose as inventories fell for the first time in six weeks, but copper eased as concerns about the outlook for demand persisted.
Copper for three-months delivery on the London Metal Exchange fell to $5,010.75 (U.S.) a tonne at 0958 GMT from $5,050 on Tuesday. Aluminum rose to 1,480 a tonne from $1,472.
Stocks of aluminum dropped by 1,125 tonnes but were still above 4.2 million tonnes, having hit record highs on a daily basis since April 20.
However the outlook for the over-supplied aluminum market remains dire, ahead of a potential series of production restarts in China and as economic turmoil continues to punish the auto sector.
“Aluminum is still a market in substantial surplus,” said analyst Adam Rowley at Macquarie Bank. “We are getting to a position where stocks are getting so high that they could take years to wear off, even with demand recovering.”
But improving sentiment, cancelled warrants for aluminum – metal tagged for delivery – rose to 78,200 tonnes from 74,350 on June 1, and compared to 56,875 tonnes on May 1.
Losses in stock markets and a rising dollar kept copper's gains on a leash: moves in industrial metals tend to track equities, while a stronger dollar makes metals priced in the U.S. currency more expensive for holders of other currencies.
Prices of the metal used in power and construction have gained about 5 per cent so far this week as investors have welcomed a recent spate of better-than-expected data.
But analysts warn that copper's recent strength masks persistantly poor fundamentals. Markets are entering a traditionally quiet period at a time when a supportive bout of Chinese restocking – which has helped lift copper by 60 per cent year-to-date – appears to be subsiding.
“Markets have run ahead fundamentals,” said Robin Bhar, an analyst at Calyon, adding that copper's recent rally was based largely on “expectations and hope... not reality” regarding actual demand.
“I have doubts as to whether we can sustain these prices, we have a slow summer ahead of us,” he said.
But stocks of copper fell once again, down 2,700 tonnes to 306,525 tonnes.
Later in the session investors will eye data including U.S. ISM non-manufacturing data and U.S. factory orders data, both due at 1400GMT.
Lifting sentiment, April U.S. pending home sales rose 6.7 per cent, reinforcing more positive manufacturing data from around the world on Monday.
Among other industrial metals zinc stood at $1,563 from $1,580, battery material lead was at $1,640 from $1,659.
Tin traded at $14,600 from $14,500. Cancelled warrants stood at 1,465 tonnes – about 10 per cent of total stocks – up from 320 tonnes at the end of last week.
Pointing to worries about supplies, tin remains in a strong backwardation of about $265 – a premium for nearby material over the three-month contract.
