LONDON, Aug 23 (Reuters) - Copper steadied on Monday as investors weighed an uptick in European stocks against a stronger dollar and lingering doubts about demand prospects in top consumers China and the United States.
Traders were also watching the premium or backwardation on London Metal Exchange aluminium to be delivered on Tuesday and bought back on Wednesday -- known as the tom/next and often used to lend metal to entities that are short of the metal.
Benchmark copper on the LME traded at $7,249 a tonne at 1529 GMT. The closing bid on Friday of the metal used in power and construction was $7,252 a tonne.
Stock markets, seen by some as a proxy for economic growth, rose in Europe from last week's one-month low as more merger and acquisition news improved sentiment, but Wall Street turned negative soon after the open.
Also weighing on metals, the dollar resumed gains clocked up last week when poor data from the U.S. rattled investors and prompted a move into the perceived safety of the U.S currency.
A strong dollar makes dollar-priced metals costly for European investors.
"European shares have helped today (but) if we see a further increase in the dollar this is a negative sign," said Daniel Briesmann, analyst at Commerzbank.
He added: "We expect further falls in base metals in the short term mainly because of further poor economic data and a further slowdown in imports from China."
Chinese consumer price inflation data in the middle of September could be a trigger for policy tightening. But before then the market will see surveys of China's purchasing managers in manufacturing. Recent releases have shown activity in many countries expanding at a slower pace.
"You are looking at an economic environment in the U.S. which is likely to remain a concern and growth rates in China could be under pressure...," said Dan Brebner, analyst at Deutsche Bank. "In the short term, the macro environment is turning against industrial metals."
WRONG-FOOTED
One support seen on Monday was news that China's imports of refined copper rose 6 percent in July from a month earlier, the first increase in four months thanks to arrivals of contracted spot cargoes.
Traders expect this to be a new trend and cite rising cancelled warrants -- material earmarked for delivery -- on copper stocks in LME warehouses.
Copper stocks stand at 402,200 tonnes, down more than 20 percent since the middle of February. Stocks of aluminium, used in transport and packaging, at 4.46 million tonnes compare with a record above 4.64 million tonnes in January.
Large inflows of aluminium into LME warehouses on Monday and Tuesday last week -- more than 91,000 tonnes -- were partly due to the tom/next premium -- at around $4 a tonne.
The backwardation has emerged because of two significant positions holding between 30 and 40 percent of aluminium stock warrants and cash contracts.
"There are some parties caught short of material," a trader said, adding that he thought the situation was temporary.
"It's just a case of being caught wrong-footed, traders trying to make money in an extremely difficult environment."
Traders are also keeping an eye on other large LME stock warrant and cash positions on aluminium alloy, North American aluminium alloy, copper, nickel, lead and tin.
Worries about tin supplies from Indonesia pushed the cash to three-month premium to around $200 a tonne last week compared with a discount of $63 late June. It is now around $100 a tonne.
Three-month aluminium traded at $2,038 a tonne from $2,040 on Friday and lead at $2,048 a tonne from $2,056. Tin was at $20,555 from $20,650 and nickel at $21,250 from $21,550.
Zinc traded at $2,037 from Friday's last bid at $2,058.
Metal Prices at 1530 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2009 Ytd Percent
move COMEX Cu 328.05 -1.05 -0.32 334.65 -1.97 LME Alum 2032.00 -8.00 -0.39 2230.00 -8.88 LME Cu 7246.00 -63.00 -0.86 7375.00 -1.75 LME Lead 2043.00 -13.00 -0.63 2432.00 -16.00 LME Nickel 21200.00 -350.00 -1.62 18525.00 14.44 LME Tin 20500.00 -150.00 -0.73 16950.00 20.94 LME Zinc 2030.00 -60.00 -2.87 2560.00 -20.70 SHFE Alu 15330.00 20.00 +0.13 17160.00 -10.66 SHFE Cu* 57190.00 140.00 +0.25 59900.00 -4.52 SHFE Zin 16920.00 -30.00 -0.18 21195.00 -20.17 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
