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Copper fell on Tuesday as funds took profits and weaker manufacturing data from China undermined confidence, but a falling dollar and expectations of stronger demand in the top consumer helped support prices.
Benchmark copper on the London Metal Exchange was down 1.9 per cent at $4,953 a tonne at 0847 GMT. The metal used in power and construction rose more than 4 per cent last month and is up about 15 per cent since January.
Manufacturing PMI
The Caixin/Markit survey of purchasing managers in China’s manufacturing sector fell to 49.4 last month from 49.7 in March, the 14th consecutive month of shrinkage.
“The rally we’ve had has resulted in some liquidation of longs,” said ANZ analyst Daniel Hynes, adding that weaker US manufacturing data on Monday had “cast a pall” over the market.
“But the rally we’ve had so far this year is due to more than investor positioning and a weaker dollar. There are signs the fundamental picture in China is improving.”
Industrial production, investment, property market and loans data for March have bolstered hopes of stronger demand in China, which accounts for nearly half of global copper consumption estimated at around 22 million tonnes this year.
Also helping metals is the weaker US currency, which makes dollar-denominated commodities cheaper for non-US firms; a relationship used by funds to generate buy and sell signals from numerical models.
Three-month aluminium fell 1.5 per cent to $1,653 a tonne. But it is up more than 10 per cent in April and is trading near its highest since July last year.
Higher prices are partly due to a decision in December by Chinese smelters to shut capacity, a move that was followed by plans by six smelters to form a joint venture to possibly stockpile up to 1 million tonnes of the metal.
“The cutbacks in China were pretty unprecedented, that has been a main supporting factor,” said Dan Smith, analyst at Oxford Economics. “There is of course the danger they could be reversed due to the price rally.”
Focus is also on a decision by China to suspend the release of base metals output data amid a crackdown on the illegal sale of statistics by government officials could make it difficult for analysts to gauge the strength of demand.
Zinc was down one per cent to $1,919, lead slid 1.8 per cent to $1,772, tin rose 0.4 per cent to $17,290 and nickel added 1.4 per cent to $9,575.
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