‘All the metals have gone way beyond the fundamentals. A correction is much needed after such huge gains'
Copper's rally faltered on Thursday as investors in a more sombre mood paused to assess whether recent gains were justified given that economic recovery may not be as strong as prices indicated.
Three-month copper (HG-FT) on the London Metal Exchange was trading at $6,095 (U.S.) a tonne at 0953 GMT, down from the closing bid at $6,199 on Wednesday, when it hit a 10-month high of $6,235.
The metal used in power and construction is up about 50 per cent since the start of April when markets started to believe a recovery, albeit fragile, could happen sooner than thought.
This week's gains – about 7 per cent – were triggered by manufacturing data from the China and the United States, the world's top two copper consumers.
“All the metals have gone way beyond the fundamentals. A correction is much needed after such huge gains,” said Stephen Briggs, analyst at RBS Global Banking & Markets.
“There's ample scope for disappointment on economic data ... good fundamentals are a long way in the future.”
On the economic agenda is the July employment data on Friday from the United States, the world's largest economy. Analysts say the data is notoriously volatile, but that the numbers were often a good gauge of the U.S. economy.
Before that however, markets will be keeping a close eye on U.S. weekly jobless claims due at 1230 GMT.
Supporting sentiment was news that auto makers Japan's Toyota Motor Corp and Germany's BMW both beat forecasts with quarterly results, which were boosted by government schemes to scrap old cars for new.
The news is particularly relevant for aluminum, used heavily in transport. Aluminum (AL-FT) was at $2,036 a tonne from $2,070 on Wednesday when the metal also used in packaging touched a 9-month peak of $2,115 a tonne.
Also boosting aluminum prices are worries about nearby supplies, given that about 70 per cent of stocks – at a record 4.56 million tonnes – are tied up until next May in financing deals to release cash for producers.
Tin touched $15,400 a tonne, the highest since the middle of June. It was at $15,000 from $15,300 on Wednesday. Focus is on a large position holder, which has bought tin for delivery in September and sold it for December.
Worries that those who sold to the entity will be caught short of the metal pushed the premium for the September contract over the December contract to $1,500 a tonne on Friday.
The spread traded at $1,000 a tonne on Tuesday and was valued at $960 at the close on Wednesday.
Stainless steel ingredient nickel traded at $20,030 a tonne from an 11-month high of $20,450, hit on Wednesday.
Prices have slipped, but market talk that Brazil's Vale Inco has declared force majeure at its Sudbury nickel operations in Canada, Ontario, will help bolster sentiment.
Sudbury produces about 85,000 tonnes of nickel a year – about 7 per cent of global annual consumption estimated by some at around 1.2 million tonnes this year.
“You are talking about an awful lot of production,” said Gayle Berry, analyst at Barclays Capital. “Nickel is going to remain well supported.”
Battery material lead was at $1,921 a tonne compared with $1,945 at on Wednesday, zinc, used for galvanizing steel, was at $1,880 from $1,920.
