Copper for three-months delivery on the London Metal Exchange closed at $7,545 a tonne, bouncing from earlier losses. The metal used in power and construction traded below a session peak of $7,608 a tonne - the highest since January 12 - and up from Monday's close of $7,500. "We think the underlying demand story is still very strong," Daniel Smith, an analyst at Standard Chartered, said of the copper market. China's trade data, and other key economic indicators from the commodity consuming giant, including industrial output, are due on Thursday.
-- Aluminium stocks see biggest jump in five months
"The data from China on Thursday will be bullish and that'll help to take metals higher in the short term," Smith said. LME stocks of copper rose by 3,300 tonnes to 526,750 tonnes, reversing Monday's fall of over 2,000 tonnes, with total inventories hovering around 11-month highs. Analysts said currency markets were capping gains as the euro fell against the dollar and hit a four-month low against sterling after a survey of German economic sentiment came in below expectations.
But analysts see limited downside for copper, citing demand from investors who are betting on higher global consumption, particularly from China, the top consumer of copper. "We have seen some fresh investor flows last week and yesterday and I believe Chinese industrial production numbers later in the week could give another boost to prices," said Robin Bhar, an analyst at Calyon.
Investors have sharply increased their net speculative long positions in the copper market over the last week when prices dipped after a sharp rally that started in late December, Credit Suisse said in a research report. Aluminium stocks rose 43,875 tonnes to 4.62 million tonnes, only around 15,000 tonnes below a record high hit in mid-December. Prices closed at $2,293 a tonne, from Monday's close of $2,303.5 a tonne.
But analysts dismissed the worries raised by a massive inflow of more than 40,000 tonnes in Detroit, home to one of the top automakers General Motors, saying auto sector data showed that recovery was on track. LME zinc was at $2,503 a tonne, from Monday's $2,480 a tonne, while nickel was at $19,200 a tonne from $18,890 and having hit an earlier intra-day peak of $19,375 a tonne, its highest in almost two weeks.
Tin was last quoted at $17,975/18,000 a tonne from $17,980, while lead traded at $2,425 a tonne versus $2,465. "Global base metals consumption returned to positive territory in Q4 09 and we expect the pace of recovery to accelerate in early 2010," Barclays Capital said in a note.