Copper drifted lower yesterday as investors looked past a weaker US dollar, worried that scant demand outside China would stall a run-up that has more than doubled the metal's price this year.
The greenback's slump to one-year lows against the euro, which makes commodities cheaper for holders of other currencies, helped copper post modest gains earlier in the session, before demand concerns weighed on sentiment.
"We are seeing early signs of demand picking up in the world outside China, but I won't say that there is conclusive evidence that this is happening at a pace that is significant," said Yingxi Yu, analyst at Barclays Capital.
"Our view is copper is well supported, but to drive the next leg of the rally, it's going to take much more than China and the dollar."
The dollar slid to a one-year low against a basket of currencies while Asian stocks touched a 13-month top ahead of the US Federal Reserve's policy decision later in the day, with its post-meeting statement likely to take note of an improving economy.
Three-month copper on the London Metal Exchange MCU3 fell $78 to $6,192 a ton in early trade. LME copper rose as much as 3 percent on Tuesday before cutting gains to close at $6,270 a ton, up 1.3 percent.
Shanghai's benchmark third month copper SCFc3 dropped 430 yuan to end at 48,220 yuan a ton.
China's apparent copper demand fell 13.9 percent in August from July, following a slide in imports by the world's top consumer of many base metals.
Analysts expected the drop in Chinese copper imports after record purchases in the first half, but had anticipated demand elsewhere would pick up fast enough to offset the slack.
LME copper stocks have climbed around 30 percent from early July to 331,775 tons on Tuesday, while inventories of the industrial metal surged to more than five-year highs at 104,248 tons in Shanghai last week.
Yu said Chinese copper imports were likely to fall further from August's levels. "That's potentially a downside risk to prices," she said.
(Agenices via China Daily September 24, 2009)
