Industrial metals fell on Wednesday, with copper off as much as 1 per cent as upside momentum faded and investors refocused on external influences including the dollar and equities.
“In the past few days the upward momentum has dissipated. The dollar isn't doing much and there is not much economic data,” said Leon Westgate, an analyst at Standard Bank.
“The market is looking to exogenous factors – the dollar, equities and energy will continue to exert influence over the summer period. There are also some concerns in the market after Bernanke's comments and his handle on inflation.”
Copper HG-FT for three-month delivery on the London Metal Exchange fell $38 to $5,362 at 1052 GMT, while Shanghai's benchmark third-month copper futures contract closed at 42,980 yuan ($6,292) little changed on the day.
World stock markets clung close to nine-month highs with some selling in Europe keeping a lid on further gains and the dollar was steady against major currencies.
BHP Billiton, which reported a 21 per cent fall in copper output in the latest quarter, said restocking of commodities in China may have come to an end, though North American markets may be starting to rebuild inventories.
But traders in Asia said that although restocking by China State Reserves Bureau, which is thought to have bought some 235,000 tonnes of copper this year may be over, imports would remain at comparatively high levels due to a shortage of scrap.
“Chinese fabricators are relying more heavily on refined metal for their feedstock as scrap supplies are fairly limited,” a trader in the city-state of Singapore said.
“The tightness in scrap is unlikely to be relieved any time soon, so we think although imports will probably be down from these record levels, they won't collapse.”
Hopes for a pick-up in demand as the global economy recovers were underlined by a fifth straight month of record Chinese refined copper imports, up 12.4 per cent from a month earlier.
In the first half of the year China has consumed 3.7 million tonnes of copper, up 48 per cent from 2088, according to Reuters calculations.
“We now think demand will come in higher than previous expectations. Scrap tightness will support Chinese imports at comparatively high levels,” a UK-based LME dealer said. “All the commodities are picking up – oil is around $65 – less impressive than the gains in metals and equities, but sentiment is driving these markets and expectations are more positive so prices are rising.”
China also imported a record amount of nickel in June, at 41,008 tonnes, up nearly 64 per cent from the previous month, official customs data showed.
Aluminum AL-FT rose 0.4 per cent to $1,722 building onto its 11 per cent rise in the past two weeks.
The Singapore trader said that aluminum's longer term prospects were comparatively bright, despite record stockpiles and the potential for capacity restarts.
“A lot of the metal in storage now won't come out until the price is right, so it's more-or-less out of the market.”
“Aluminum is highly geared to the economic cycle and as demand recovers, available material in LME stores will come under pressure and result in higher prices – at least until we hit levels that can thaw the financed metal glacier.”
LME stocks of aluminum stand at a record 4.56 million tonnes – enough to supply the world for six weeks.
