Copper edged up on Tuesday as the dollar weakened, but prices still hovered around their lowest levels in nearly two weeks as investors remained sceptical of Europe's efforts to pull itself out of a debt crisis.
Three-month copper on the London Metal Exchange traded at $7,645 a tonne by 13:20 SA time, up 0.5 percent from a close of $7,606 on Monday, when prices had fallen to a near-two week low during the session at $7,565.50.
The euro rebounded from two-month lows against the dollar, helping stabilise prices for base metals. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
Doubts lingered over Europe's ability to calm market fears surrounding its growing debt crisis, and uncertainty grew about whether its efforts so far would be enough to fend off a mass downgrade of sovereign credit ratings within the currency bloc.
Moody's said on Monday it intends to review the ratings of all 27 European Union states in the first quarter of 2012, while credit agency peer Fitch said pressure on their ratings had risen after last week's EU summit yielded no “comprehensive” crisis solution.
“The market is constantly expecting each European summit to deliver a clear cut solution and it disappoints because it's almost impossible to deliver that,” said Nic Brown, head of commodity research at Natixis.
A pact among up to 26 European Union countries to enforce stricter budget rules and win back confidence in the euro zone will be finalised by March 2012, European Council President Herman Van Rompuy said on Tuesday.
Copper has fallen around 21 percent so far this year, ending a run of two straight annual gains, on worries about the demand outlook for industrial metals as the crisis in Europe threatens to crimp growth in the global economy.
Later in the session, investors are expected to closely monitor a US Federal Reserve meeting, with an outcome due after European markets close.
The Fed is likely to hold off offering the US economy fresh stimulus as it weighs encouraging signs on the recovery against risks coming from Europe.
STRIKE DEAL
Freeport McMoRan Copper & Gold Inc and its Indonesian workers' union expect to sign a pay deal on Tuesday to end a three-month strike that has crippled production at the world's second-biggest copper mine, two sources told Reuters.
The decline in copper prices has been limited in recent months by output disruption at some of the biggest mines in the world, including Freeport's Grasberg in Indonesia and Cerro Verde in Peru.
“Metals specific fundamentals seem to take a backseat for now, as the negative implications of ongoing sovereign debt problems are back in focus,” Credit Suisse said in a note.
Across other metals, aluminium rose to $2,029.50 from a close of $2,015 a tonne on Monday.
LME data showed 100,000 tonnes of aluminium flowed into warehouses in Detroit, with total aluminium stocks in LME-registered warehouses climbing to a fresh record high of 4,811,550 tonnes.
Zinc, used in galvanizing, climbed to $1,938 from a close of $1,932 a tonne, while tin was at $19,675 from $19,900.
Nickel eased to $18,405 from $18,450 while battery material lead was almost flat at $2,105, from Monday's close of $2,105.50.
Most of China's larger battery manufacturing plants have reopened after obtaining environmental clearance, pushing demand for refined lead higher and prompting smelters to raise production, industry sources said on Tuesday. - Reuters