Copper dipped on Tuesday after Chinese metal imports fell and as a weak euro weighed, but losses were limited as investors expected further stimulus by global central banks to reign in faltering economic growth and help lift metals demand.
The modest losses in copper represented the fourth decline in five days as the market came off a peak largely spurred by a surprise deal by European leaders on June 29.
Three-month copper on the London Metal Exchange shed 0.31 percent to $7,536.25 a tonne at 16:00 SA time after touching an intraday low of $7,508. Copper rose 0.4 percent on Monday.
“There's been some responses by central bankers to deteriorating conditions (and) we've had some positive news flow out of Europe, but I wouldn't call this a strong market at all,” said Deutsche bank analyst Dan Brebner.
“Growth is going to remain sluggish over the next couple of months with the possibility of further deterioration in the US and China, and my expectation is this will continue to weigh on metals markets.”
Euro zone finance ministers agreed a deal overnight to release 30 billion euros ($36.9 billion) of bailout funds to help Spain's banks by end-July, while risk assets also benefited from hopes Germany's top court would ultimately approve the European Union's new permanent bailout fund.
The euro, however, remained near a two-year trough versus the dollar, indicating investors remained wary about Europe despite the political action. A weak euro makes dollar-priced metals more expensive for European investors.
Overall, investors were reluctant to take sizeable positions in metals due to uncertain growth in top metals consumer China in the second half ahead of fresh GDP data this week as well as the potential for more monetary easing by central banks.
Recent comments from central bankers have raised hopes for stimulus. Three top US Federal Reserve policymakers called for more quantitative easing, while European Central Bank President Mario Draghi said the bank may cut interest rates again if economic data supported the move.
Since the beginning of May, copper has lost 10 percent due to fears about the European debt crisis and the global economy, but the market is virtually flat so far this year.
RAYS OF HOPE
Analysts said Tuesday's Chinese trade data came in largely in line with expectations, showing its imports of copper fell 17.5 percent in June compared with May.
Despite the sharp month-on-month drop in copper imports, the total for the first half was still 47 percent higher than the same period last year.
The broader Chinese trade data, however, raised concerns about the strength of domestic demand in the world's second-biggest economy.
“Base metal prices have held up well today despite the dismal China import figures as many believe such data will help push central banks towards more stimulus policies soon. This means there isn't much downside room for metals from here,” said a Shanghai-based trader with an international firm.
Amid the data, signs have begun to emerge of a pick-up in copper demand, analysts and trade sources said.
Macquarie Commodities Research analyst Bonnie Liu said she was seeing budding signs of improving demand in China, particularly among large copper fabricators that were receiving more orders for state grid construction.
“I think Chinese demand has bottomed out and has started to improve since May, led by government infrastructure spending. The price outlook is comfortable for the second half from recent lows seen in June,” she said.
In aluminium, UBS cut its average LME three-month price forecast for 2012 to 98 cents a lb ($2,161 a tonne) from a previous forecast of 101 cents after producers failed to cut capacity as much as expected.
“Without these cuts, the aluminium price will most likely continue to slide,” analyst Julien Garran said in a note, adding that the price was expected to average 95 cents a lb ($2,095/tonne) in the third quarter.
Aluminium was up at $1,928.45 a tonne against Monday's close of $1,925, while nickel shed 0.87 percent to $16,258 a tonne.
Top aluminium maker Alcoa Inc's quarterly revenue and profit beat Wall Street's expectations, even though prices for its aluminium are at nearly two-year lows, and it forecast growing demand in the aerospace and auto sectors.
Zinc edged 0.09 percent lower to $1,852.25 a tonne, tin rose 0.27 percent to $18,750 a tonne, and lead edged up 0.01 percent to
$1,878.25 a tonne.
In industry news, Hunan Nonferrous Metals Corp Lts, China's top zinc producer, said on Tuesday that it expected to record a loss in net profit for the first half of 2012 as the selling price of its major products fell. - Reuters