New York, London — Copperprices lost more than 2 per cent of their value by the close Thursdayas a rallying dollar pressured values, but analysts said a healthierglobal demand outlook was expected to fortify sentiment and prices.
Copperfor March delivery on the New York Mercantile Exchange's Comex divisiondropped 7.75 cents (U.S.), or 2.4 per cent, to settle at $3.1280 apound, after dealing between $3.1180 and $3.2045.
On the London Metal Exchange, benchmark copper closed at $6,870 a tonne, down $169 from the close Wednesday.
Thedollar surged to a three-month high against a currency basket after theFederal Reserve voiced growing optimism about the health of the U.S.economy, while the euro tumbled on worry about Greece's fiscal health.
“Themarket is very sensitive to some of the events going on in Europe, withrespect to the credit and quality problems in Greece,” said StevePlatt, futures analyst with Archer Financial Services in Chicago.
“It certainly could feed back into the copper and be a real limiting influence in terms of upside movement,” he said.
However,the damage from the dollar has partly been offset by improving economicdata from the United States, the world's largest economy, highlightedin a statement from the Fed on Wednesday, and expectations of higherdemand.
“For metals, the uptrend is still very much in place,”said analyst Gayle Berry at Barclays Capital, adding the upbeateconomic data over the past couple of weeks has raised the prospectsfor metals.
A higher U.S. currency makes dollar-denominatedmetals more expensive for holders of other currencies. Even though someanalysts think the dollar will rise further, fundamentals are expectedto play a bigger role in coming months.
Copper prices are upabout 125 per cent this year, despite a bearish backdrop of a growingsupply base. Inventories of the metal used in power and construction inLME warehouses stand at 474,575 tonnes – a gain of about 85 per centsince the middle of July and the highest since April.
Aluminum stocks hit a record high above 4.637 million tonnes, nearly double the levels seen at the start of 2009.
Butprices of the metal used widely in transport and packaging are up about45 per cent this year because about 70 per cent of LME stocks are tiedup in financing deals until May and so are not available to the market.
Also a plus are cancelled warrants – material already earmarked for delivery – at around 200,000 tonnes.
“Thoughit's not available, there's a massive stock overhang, a capacityoverhang and the outlook is for a large aluminum market surplus overthe next few years,” said Max Layton, analyst at Macquarie.
Tinprices bucked Thursday's softer trend in metals and rose to theirhighest in six months at $15,820 and closed $275 higher at $15,775 atonne.
“We've seen a rapid increase in tin stocks, but recentlythat rise has come to halt and they've actually begun to fall,” Ms.Berry said. “Also, the price spread between China and London is holdingat a sizable premium, telling that Chinese demand is doing prettywell,” she said.
Tin stocks are currently at 26,400 tonnes, downonly about 500 to 600 tonnes from the seven-year high hit in November.But LME data shows between 80 per cent and 90 per cent of the stocksare held by a single dominant position.
Nickel closed at $17,100a tonne from $17,500 at the close Wednesday, aluminum at $2,220 from$2,276 and zinc at $2,391 from $2,434. Battery material lead traded at$2,359 a tonne from $2,410.