Copper falls on stronger dollar

Tag : lead,copper
China - * Dollar rally puts pressure on base metals
* Tin pares gains but fundamentals seen strong
* Global economy concerns continue
(Updates with New York closing copper prices, adds dealer comments)
By Humeyra Pamuk and Julie Crust
LONDON, Sept 4 (Reuters) - Copper fell on Thursday, reversingearlier gains, in erratic trade as the metal continued to take itscue from the currency markets.
Bargain hunting earlier lifted the metal 1 percent to its highestlevel in almost a week, before the stronger dollar pushed copperlower.
The strengthening U.S. currency also put pressure on tin, which wasearlier boosted by a sharp rise in cancelled warrants -- materialearmarked for delivery -- and LME inventories falling to nearthree-year lows.
Dan Smith, analyst at Standard Chartered (other-otc: SCBEF.PK - news - people ), said: "Copper and tin are looking quite tight from afundamental perspective."
Copper for three-months delivery on the London Metal Exchange roseas high as $7,440 per tonne before closing at $7,226 per tonne,versus Wednesday's $7,345.
Earlier in the week copper fell to $7,128 per tonne, nearing itssix-month low and bringing the total losses to 7 percent since thebeginning of last week.
Copper for December delivery shed 4.60 cents to settle at $3.2660 alb on the New York Mercantile Exchange's COMEX division.
"Right now, copper is so tied inversely to the dollar," saidMichael K. Smith, president of T & K Futures and Options Inc. inPort St. Lucie, Florida. "I think the dollar probably has anotherbasis point or two in it before this little run-up is done, andthen I think the bull market will be back on ... especially for theindustrial metals."
The euro fell on Thursday to its lowest level against the dollarsince January after the chairman of euro zone finance ministersJean-Claude Juncker said that the single currency was stilleffectively overvalued.
"I think the sentiment still remains pretty vulnerable," saidanalyst Sudakshina Unnikrishnan at Barclays (nyse: BCS - news - people ) Capital. "The concerns still remain on board about how theglobal economy is developing. Concerns about the slowdown and howthat links back to demand are pretty much in place."
The recent rises in copper inventories are a sign of still sluggishdemand. Stocks of copper, mainly used in construction, stand around182,000 tonnes - its highest since January.
"There are still grey clouds over the United States and Europe,"Gerard Burg, an analyst at the National Australia Bank (nyse: NAB - news - people ), said.
"The trend for metals is down. The global economy is looking softerthan in some years and supply is moving into surplus for some ofthese metals," Burg said.
Aluminium closed up $1.50 at $2,677 per tonne. Several analystscite structural power problems in China as likely to lead to atighter aluminium market. However, stocks are around 1.17 milliontonnes -- the highest since April 2004.
In industry news, Vedanta Resources Ltd expects aluminium output torise to about 500,000 tonnes in the year to March 2009, up 28percent from the previous year, a senior company official toldReuters.
Zinc pared earlier gains, when it jumped almost 5 percent, and lead<MPB3> turned around from a 4 percent rise to close down $59at $1,891 a tonne.
Zinc <MZN3> closed at $1,812 from Wednesday's last quote of$1,787.5/1,788 and nickel <MNI3> was at $19,205 from$19,550/19,600.
Unnikrishnan at Barclays said the rise of cancelled warrants in tin-- currently accounting for around 17 percent of total stocks at5,820 tonnes, supported the price.
Standard Chartered's Smith said the fundamentals for nickel andzinc are weak but that both metals may rise over the next couple ofweeks on some short-term buying. In the longer term he sees theoutlook for the metals to be quite poor.
Metal Prices at 1800 GMT Metal Last Change Pct Move End 2007 YtdPct
move LME Cu 7226.00 -119.00 -1.62 6670.00 8.34 SHFE Cu* 57960.00250.00 +0.43 56880.00 1.90 LME Alum 2670.00 -5.50 -0.21 2403.0011.11 SHFE Alu* 17175.00 25.00 +0.15 18180.00 -5.53 COMEX Cu**329.70 -5.70 -1.70 303.05 8.79 LME Zinc 1802.00 27.00 +1.52 2370.00-23.97 SHFE Zinc* 14475.00 230.00 +1.61 18950.00 -23.61 LME Nick19175.00 -275.00 -1.41 26350.00 -27.23 LME Lead 1908.00 -42.00-2.15 2550.00 -25.18 LME Tin 19200.00 275.00 +1.45 16400.00 17.07** 1st contract month for COMEX copper * 3rd contact month for SHFEAL, CU and ZN SHFE ZN began trading on 26/3/07 (Additionalreporting by Chris Kelly in New York; Editing by Marguerita Choy) Copyright 2008 Reuters, Click for Restriction