Copper slides as dollar rallies

Production and Markets

Copper slipped almost 4% on Monday before paring losses, as a dollar rally weighed on most industrial metals. Profit-taking also pushed nickel, tin and lead lower.

The dollar rose to a three-week high against the euro with weaker than expected Italian and Spanish inflation data and tax cuts in Germany seen heaping pressure on the European Central Bank to cut interest rates further soon. A stronger dollar dampens metal demand from non-US currency countries. The weak outlook for base metals also added pressure.

"There is no real sign on the macro side that anything will improve soon," said Dan Smith, analyst at Standard Chartered. "Copper and nickel are likely to head lower in particular."

Copper for three-month delivery on the London Metal Exchange fell to a session low of US$3,115/t but pared losses to trade at US$3,225 at 1557 GMT from US$3,231 at the close on Friday. The metal dropped more than 50% in 2008 on declining demand and growing inventories.

Stocks in LME warehouses continued to rise, climbing 1,500t to 342,050t -- the highest since February 2004. Nickel, tin and lead were pressured by the stronger dollar and profit-taking after recent gains. Nickel fell to a low of US$12,350/t from US$13,200/t on Friday and stood at US$12,690/t at 1618 GMT.

Up until last week the metal, mainly used in stainless steel, had soared 32% from the close on December 29 helped by pre-positioning ahead of an annual rebalancing by major commodity indices due to start later this month. Lead fell to US$1,060/t from US$1,090/t. The metal had rallied 29% since December 28.

Tin declined to US$11,000/t from US$11,625/t. It had gained 19% since December 29.

Aluminium fell to a low of US$1,535/t from US$1,570/t. The metal used in transport and packaging has come under pressure in recent weeks on news of falling car sales data from auto makers.