An employee works with a reel of copper cable at a factory in China.ALY SONG
Copper backed away from a 14-month peak by the close Wednesday, as the market paused to catch its breath from recent gains and early momentum faded as inventories rose, while weak U.S. housing data fanned economic recovery concerns.
Copper for December delivery on the New York Mercantile Exchange's Comex division ended up 0.20 of a cent (U.S.) at $3.1105 a pound, away from a session peak at $3.1720, its highest level since late September, 2008.
On the London Metal Exchange, benchmark copper touched $6,992 a tonne, another high dating back to September, 2008, and more than double the levels seen in January. The metal used in power and construction settled up $25 at $6,880 a tonne.
"It's very hard to make a fundamental argument for copper," said Bill O'Neill, partner of Logic Advisors in Upper Saddle River, N.J.
"Warehouse inventories keep going up and the [housing]data today is certainly not encouraging here, but the funds keep pouring in ... there is just avaricious demand for commodities," he said, referring to data on Wednesday showing construction of new U.S. homes off sharply last month.
Separately, the U.S. Labour Department said the Consumer Price Index rose 0.3 per cent last month, a touch above market expectations.
Prices of industrial metals have been rising since early April, when markets with the help of stronger economic data from around the world, including top consumer China, started to think the worst of the recession could be over.
"Expectations of better times in 2010 is behind the strength in industrial metals," said Robin Bhar, analyst at Calyon.
"There is a feeling that it will take time for more positive data to translate into final real demand."
Furthermore, a weaker dollar, which makes commodities cheaper for holders of other currencies, has helped push up prices of base metals in recent months.
Chinese purchases of copper for stockpiling up until the middle of July meant stocks of the metal in LME warehouses fell. But since then stocks have risen by more than 60 per cent to above 410,000 tonnes, the highest since late April.
LME stocks of aluminum at above 4.55 million tonnes are still within touching distance of the record high of 4.629 million tonnes seen in September. Aluminum closed at $2,065 a tonne from $2,036 on Tuesday.
The metal used widely in transport and packaging hit $2,095 a tonne, its highest since Aug. 5, after it held above support at $2,040 a tonne and markets started to factor in seasonally higher options activity.
Options give holders the right to buy or sell the three-month aluminum contracts.
Stainless steel ingredient nickel hit $17,475 a tonne, the highest in more than a week. It closed at $17,200 a tonne from $16,900 at the close on Tuesday.
Prices of nickel have come under pressure from stocks at 15-year highs above 132,000 tonnes. Expectations are for nickel stocks to move towards record highs above 150,000 tonnes set in November, 1994.
"There is local speculation in China that part of the country's privately held nickel stocks could be released to market, perhaps as much as 50,000 tonnes before year end," investment bank Fairfax said in a note.
Battery material lead touched a one-month high at $2,447.75 and ended at $2,403 from $2,385 on Tuesday.
Zinc closed at $2,248 a tonne from $2,263 on Tuesday and a three-week high at $2,313.75 set earlier on Wednesday.
Zinc stocks jumped 15,650 tonnes to hit a four-year high at 449,375 tonnes. Warehouses in New Orleans was the destination for a large chunk of this stock, according to LME data.
The news had little immediate impact on the metal used to galvanize steel, but traders are watching the trend.
Tin hit $15,300, the highest since late October. It closed at $15,195 from $14,950 on Tuesday.