Copper (HG-FT) prices hit a two week low on Thursday as a stronger dollar and demand worries weighed, and as funds that have driven prices up to multi-month highs took profits.
Benchmark copper for three-months delivery on the London Metal Exchange traded at $6,865 (U.S.) a tonne at 1034 GMT from a close of $6,945 on Wednesday. Earlier it hit $6,810, its lowest since late November.
“There's dollar strength, volumes have been lower, and a lot of people have taken money off the table,” said Randy North, a trader at RBC Capital Markets. But he added: “I don't think there's fresh shorts... We're getting close to support levels at $6,800, which should hold.”
The U.S. dollar held onto recent gains against the euro, as concerns over the poor fiscal health of Greece and Spain weighed on the single currency. A stronger dollar makes dollar-priced metals more costly for non-U.S. investors.
Worries over mounting debt weighed on metals on Wednesday, after Standard & Poor's cut its outlook on Spain to negative and warned of the risk of a debt downgrade. The move came a day after Fitch Ratings slashed Greece's debt rating and Moody's downgraded six Dubai-linked issuers.
“There will be some more jitters on the market with risk sentiment swinging back and forth this week,” said Andrey Kryuchenkov.
“Overall sentiment on the U.S. currency has improved a little. However, we still believe the dollar will stay depressed at the start of 2010. In the meantime, copper is likely to consolidate around $6,800,” he added.
China Data
LME copper, on course for its biggest weekly drop since September, has shed more than 4 per cent since funds betting on a recovery in 2010 pushed it to 14-month highs last week.
Analysts remained concerned that prices have detached from weak fundamentals, as denoted in LME copper stocks, which rose 3,125 tonnes to 461,625 tonnes, up nearly 80 per cent from early July.
Supply worries have also receded after union workers at the massive Chuquicamata copper mine complex in Chile lifted a 19-hour blockade on Wednesday that halted mining.
Markets waited for import data on Friday from China for clues on the demand outlook from the world's largest copper consumer, whose record import buying this year has helped copper prices more than double.
Aluminum (AL-FT) was steady at $2,204 a tonne from $2,212, after rising to a 13-month peak of $2,215 on Wednesday.
The metal used in transport and packaging has been buoyed in recent weeks by rising physical premiums in parts of Europe as the bulk of record high LME inventories are tied up in financing deals.
“There's good demand for aluminum from Europe and the U.S. Stocks are still tied up in financing deals so what appears to be an oversupply is not a problem in the short term,” said Nic Brown, analyst at Natixis.
Steel making ingredient nickel was at $16,540 from $16,570. LME stocks rose 336 tonnes to 143,766 tonnes, less than 10,000 tonnes short of the record seen in over 10 years ago, in November 1994.
Zinc, used to galvanize steel was at $2,309 from $2,312, battery material lead was at $2,286 from $2,281, while tin was at $15,270 from $15,250.
