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Copper eases on firm dollar, profit-taking

LONDON - Copper eased on Friday as a firm dollar capped sentiment and investors booked profits after the metal touched a three-week high in the previous session.

Nickel, a key ingredient in stainless steel, and zinc used to galvanise steel fell around 3 percent as concerns about demand persisted.

Three-months copper MCU3 on the London Metal Exchange eased $104 a tonne to $7,761 by mid-session, after gaining 5 percent on Thursday when it touched $7,889 -- the highest since Aug. 4. In early trade it hit $7,885.

Most commodities rallied on Thursday as the dollar softened amid its recent upward trend with oil surging nearly 5 percent and gold hitting a 10-day high.

‘We had a superb day yesterday. In this market, investors are moving in pretty quickly and topping and tailing,’ said Nick Moore, commodity strategist at Royal Bank of Scotland.

Expectations that the US slowdown is set to move to the rest of the world has strengthened the dollar against a basket of major currencies, nearing levels last seen at the start of this year.

‘A firm dollar weighs on sentiment,’ said an LME floor trader.

Commodity Trading Advisors (CTAs), who tend to move in herds basing their trading decisions on technical charts, were seen buying and selling.

‘It is the first time that we are seeing CTAs move differently to one another -- I'm not sure what their technical analysts are reading off the charts at the moment,’ he said.

In copper, focus was on a hefty increase in LME-inventories, hitting a six-month high at 163,800 tonnes, up 4.6 percent.

In August stocks tend to move higher with many copper users such as semi-manufacturers closed for hol idays in Europe.

In Shanghai stocks fell in line with expectations, down 12 percent to 21,796 tonnes.

End of the Olympics

This weekend sees the end of the Olympic Games in Beijing and some analysts expect demand in China, copper's top consumer, to pick up as industrial production returns to normal after closures due to strict environmental regulations.

However, others fear weak demand growth may persist and Chinese data weighed on sentiment with imports of refined copper during the first seven months down by 22 percent year-on-year to 775,089 tonnes.

Implied copper demand remained anaemic into July, rising just 2 percent from June, while year-to-date growth of only 5.8 percent, is much lower than expectations at the start of the year.

‘Sentiment remains weak,’ said a Barclays Capital report.

Until there was a clear pick-up in physical activity prices were unlikely to higher, the report said.

‘However, with prices close to marginal costs in nickel and aluminium further downside looks limited,’ it added.

Aluminium was at $2,806, down $42, after touching $2,860 on Thursday, the highest since Aug. 11.

Nickel fell to $20,950, down $545, after touching a five-week high of $21,499 earlier in the session.

Lead hit $1,932.5 -- the highest since Aug. 11 -- before being indicated at $1,885/1,890. On Thursday, it closed at $1,905 after surging around 8 percent.

Zinc eased to $1,830, down against $1,880 on Thursday when the metal rose around 7 percent.

Tin touched $21,850, the highest since the start of August, before trading at $21,350/21,450. On Thursday it was last at $21,790/21,810 after rallying more than 6 percent.

Tin supply from Indonesia, the world's second-largest tin producer after China, is expected to decline this year, a tin analyst and a top producer said on Thursday.

‘The recent flow of fundamental data on tin has been very strong and it is the one sector that we think could stage a price rally even in the current uncertain macro economic environment,’ Barclays Capital said.