Copper prices fell Tuesday, backing away from 20-month highs hit in the previous session, as investors worried the rally above $8,000 (U.S.) a tonne had been overdone after top consumer China's recent bank lending curbs.
Benchmark copper for three-months delivery on the London Metal Exchange closed at $7,900 a tonne from $7,905 at the close on Monday. LME copper reached a 20-month peak earlier on Monday at $8,043.75 a tonne, following robust Chinese import data.
The pace of new bank lending in China, the world's top metals consumer, slowed last month to 510.7-billion yuan ($75-billion) from February's total of 700.1-billion yuan, as Beijing renewed efforts to stop the world's third-largest economy from bubbling over.
U.S. copper futures closed with strong gains as investors' risk tolerance went up following a successful Greek debt auction and higher U.S. share prices, but traders said, it was probably near the top of its short-term range.
Copper for May delivery rose 3.60 cents to finish at $3.6005 a pound on the New York Mercantile Exchange's Comex division and traded as high as $3.603 a pound. On Monday, May copper futures surged to $3.68 a pound, its highest since late July, 2008.
Copper prices rallied midday as investor risk appetite increased after Greece passed its first borrowing test since the euro zone agreed on a potential rescue package with a debt auction.
"The primary driver is that people are feeling a lot more optimistic after the Greek bailout. I think we are seeing some risk appetite coming back into the market," said Matthew Zeman, head of trading with LaSalle Futures Group in Chicago.
Despite only modest increases for U.S. equity markets, some investors also keyed off the positive tone as additional reason to increase risk appetite, traders said.
Despite copper's relative strength in the last two sessions, traders doubt how much further it can go under current economic conditions and think some corrective selling is likely.
"I don't think it's off-to-the-races for copper price wise too soon. I expect more sideways consolidation, maybe a little bit lower" said Mr. Zeman.
"It's probably near the higher end of its range where it may have trouble getting too much higher, at least for now. It may be due for a little bit of a setback," said Donald Selkin, chief market strategist with National Securities Corp in New York.
Market attention is now turning to Chinese data due around April 15, that include GDP, retail sales, industrial production and fixed asset investment.
Among other industrial metals, aluminum closed at $2,436 from $2,417. The lightweight metal was back in the limelight after UC Rusal confirmed plans first reported in September that it wanted to launch a physically backed exchange traded fund.
Also underpinning aluminum, India's state-run National Aluminium Co. Ltd. sold 9,000 tonnes of aluminum ingots at a premium of $82.28 a tonne over the average LME cash price on a cost, insurance and freight basis.
In other metals traded, zinc closed at $2,390 from $2,425, battery material lead ended at $2,370 from $2,359, and nickel at $25,525 from $25,780. Tin, used in electrical solder, closed at $18,610 from $18,700, having earlier hit $18,980, its highest since mid-September, 2008.