Copper fell on Tuesday, in holiday thinned trade, as traders noted more gains in stockpiles of the metal, a sharp slide in Chinese equities and the possibility that the U.S. dollar might continue to rise.
Benchmark copper for three-months delivery on the London Metal Exchange traded at $6,877.75 (U.S.) a tonne at 1039 GMT from a close of $6,940 on Monday.
“Gold has corrected and the euro has also so why shouldn't copper, especially as copper stocks are rising,” said Societe Generale analyst Jesper Dannesboe. “There's a worry for those who are long copper that the dollar might extend its recovery.”
The euro rose slightly on Tuesday but remained near recent three-month lows against the dollar. A stronger dollar makes dollar priced metals costlier for non-U.S. investors.
Highlighting still weak physical demand, copper stocks in LME warehouse rose 1,450 tonnes to total 480,900 tonnes, their highest since mid-April.
Also weighing on prices, Chinese equities closed at their lowest in seven weeks amid worries over Beijing's campaign to forestall asset bubbles by steps like adding new share supplies.
“It's not a huge fall for such a volatile index but its significant. There seems to be profit taking in many risky assets and copper hasn't participated but maybe that could come,” said Mr. Dannesboe.
Stronger-than-expected Chinese copper imports in November and a positive lead from equity markets in Europe, Japan and Australia all failed to spark a pre-holiday rally.
China's refined copper imports rose a monthly 14.8 per cent in November, rebounding from a 40 per cent fall in October and boding well for copper demand next year “There are Chinese manufacturers claiming they can't meet demand for autos and appliances. It highlights the strength of Chinese consumer demand ,” noted John Meyer, analyst at Fairfax.
Investors are waiting for economic indicators from the U.S. for clues on the recovery of the world's largest economy, including a final reading on third quarter economic growth.
Stockpile Record
In other metals traded, nickel was at $17,760 from $17,900, with LME stocks rising 114 tonnes to 150,612, a whisker away from all time record levels of 151,254 tonnes seen in 1994.
The stainless steel making ingredient hit six-week highs on Monday despite record stocks, following an announcement that Russia will reinstate a 5 per cent export tariff on the metal.
Analysts said nickel has underperformed recently and that it is playing catch up with the other metals.
Elsewhere, aluminum was at $2,260 from $2,268. Stocks of the metal in LME warehouses fell 3,525 tonnes but remained near record levels of around 4.6 million tonnes.
Much of the stock of the metal used in transport and packaging is tied up in financing deals however, so it is not available and its impact on prices is limited.
Zinc , used to galvanize steel, was at $2,429 from $2,438, having hit its best level since March last year on Tuesday, while battery material lead was at $2,310 from $2,320. Tin was at $15,899 from $15,900.
