Copper prices fell on Wednesday from a 2-1/2 month high in the previous day on investor caution about the debt crisis in Europe ahead of Greek debt restructuring talks and a bond auction by Portugal.
Benchmark copper on the London Metal Exchange (LME) was down 0.4 percent at $8,164 a tonne by 11:35 SA time from the close on Tuesday, when it also hit its highest level since late October at $8,262.
Greece is to return to the negotiating table with its creditors following a breakdown in talks on Friday. It needs a deal with the private sector within days to avoid going bankrupt when 14.5 billion euros ($18.5 billion) of bond redemptions comes due in late March.
In a further risk factor for markets, Portugal aims to sell up to 2.5 billion euros of treasury bills later on Wednesday in its biggest debt auction since last year's bailout.
“Metals are lacking direction at the moment, because the physical market is quiet and China is quiet ahead of the Lunar New Year holiday. So we are likely to see jittery macro trading,” said Andrey Kryuchenkov, an analyst at VTB.
“Copper is struggling to break above $8,200. I think we will consolidate from here or come off a bit lower.”
Falls were kept in check by a fall in the dollar against the euro and a basket of currencies. A weak dollar makes commodities priced in the US unit cheaper for holders of other currencies.
Copper prices fell by around 21 percent last year, its first annual drop since 2008, as an uncertain global economic outlook raised fears about the metal's demand prospects.
It is up 7.5 percent so far this month.
“With copper now trading back above $8,000, sentiment is turning and the question has flipped to 'how high can copper rise'?” Credit Suisse said in a note.
“Over the longer-term, we would argue that copper prices still have significant upside potential given the prevailing undervaluation and the poor supply outlook,” the analysts said, adding they expect to see some profit-taking in the short term.
CHINA CONCERNS
Investors' focus remained on the prospects for demand from top consumer China on growing concerns about the country's economic outlook and as business slows ahead of the Lunar New Year holiday at the end of January.
Data on Wednesday showed China's new home prices fell for a third straight month in December and may drop further as Beijing sticks to its campaign to bring housing costs back to levels that the government considers reasonable.
“Our economists are also expecting China to cut its reserve requirement ratio for banks sometime this week, and weak property prices could be a catalyst for this event,” ANZ analysts said in a note.
Copper stocks in LME-registered warehouses continued to show a falling trend, dropping by 925 tonnes to a fresh 13-month low.
In industry news, Freeport-McMoRan Copper & Gold's Indonesian unit has restarted copper concentrate shipments to a smelter on Java island, a company official said on Wednesday, after workers ended a three-month strike last month.
In other metals, aluminium fell 0.9 percent to $2,207.25 from a close of $2,227 a tonne on Tuesday.
Norwegian aluminium producer Norsk Hydro will close one of three production lines at its Kurri Kurri plant in Australia, taking 60,000 metric tonnes a year off the weak metals market.
The company said it was forced to act because of “the weak macro-economic environment, with low metal prices and uncertain market outlook”.
Zinc, used in galvanising, slipped 0.3 to $1,995 from a close of $2,001, while tin dipped 0.6 percent to $21,600 from $21,725.
Battery material lead was almost flat at $2,107.75 from $2,108 and stainless steel ingredient nickel fell 1 percent to $19,325 from
$19,525. - Reuters