NEW YORK/LONDON London copper prices eked out a modest gain in thinner conditions on Tuesday, failing to build strongly on the prior day's 2-percent rally, as worries about slowing Chinese demand continued to cap bullish sentiment.
These worries overshadowed comments on Monday from U.S. Federal Reserve Chairman Ben Bernanke that sparked a rally across the broader industrial metals' complex on hopes the Fed may take further steps to loosen monetary policy.
But a day later, that upside momentum waned, leaving copper prices mired in familiar ranges and lacking a catalyst to break out of the range in one direction or the other.
"We are probably near the top end of the likely trading range for the foreseeable future," said Matthew Zeman, head of trading with Kingsview Financial in Chicago.
"Even with Bernanke pledging to keep rates low ... there are reasons that he is pledging to hold rates low. The job market is still extremely fragile and the economy can still not stand on its own two feet without the Fed. That's what people are focusing on."
London Metal Exchange (LME) three-month copper rose $2 to end at $8,535 per tonne.
In New York, the May COMEX contract eased 0.75 cent to settle at $3.88 per lb, after dealing between $3.8550 and $3.9040.
About 53,600 lots traded in late New York business, down more than 20 percent from the 30-day average, according to preliminary Thomson Reuters data.
In February, prices of the metal hit their highest levels in nearly five months at $8,765 per tonne and $3.9950 per lb, but have since failed to break through that level.
"I don't expect copper to break out of the $8,200-$8,765 range. Before you see a pick up, you need to see premiums rising in China, you need Chinese players to offloads the extra inventories and you need a pick up in consumption," said Andrey Kryuchenkov, an analyst at VTB.
"Yes, February copper imports were better than people expected but that is all stockpiling from Chinese players hoping for a pickup in consumption rather than end-users demand."
Reflecting weaker end-user demand, analysts said that China holds more than 1 million tonnes of commercial stocks of refined copper cathode currently, a level last seen in 2009.
China's industrial firms suffered a rare drop in profits in the first two months of 2012 mainly in petrochemicals, metals and auto firms, the latest signs of weakness in the world's No. 2 economy and top metal consumer.
"We are in a seasonally strong period for metals, but we are running out of time. We've got six more weeks, then we get to mid-May when the market is starting to look at the summer slowdown," Dan Brebner, an analyst at Deutsche Bank, said.
"The China demand situation looks much less robust than the market would like, but the market is holding up despite all these factors."
INSIDER-China's copper stockpiles: link.reuters.com/sur37s
COMEX copper technicals: link.reuters.com/fuq37s
CFTC Commodity positions: r.reuters.com/buv87r
Global metals stocks: link.reuters.com/deg67n
Metal production database: mpd.session.rservices.com
To help base metals out of their range, the market needs fresh fundamental impetus, which may be provided by U.S. durable goods orders on Wednesday and China's official PMI due on April 1, Credit Suisse said in a note.
Chinese demand for zinc and lead from the galvanized steel and battery sector is slowly but surely picking up, said Angela Bi of Macquarie in Shanghai.
"Galvanized steel producers have been restocking since the end of February, so we see some fundamental support for zinc. The short-term downside risk to zinc is still limited, but I don't see much momentum to push the price above the marginal cost level because there is still huge inventory," she said.
"For lead, the fundamentals are much better. Smaller lead acid battery plants have ramped up production since the end of February. Automakers have also raised production 10-15 percent in March, at the same time bike production is also recovering from the Chinese New Year period," she said.
Three-month zinc closed up $13 at $2,034 a tonne, while lead ended off $16 at $1,986 a tonne.
Metal Prices at 1805 GMT
Metal Last Change Pct Move End 2011 Ytd Pct
COMEX Cu 388.05 -0.70 -0.18 343.60 12.94
LME Alum 2196.00 10.00 +0.46 2020.00 8.71
LME Cu 8535.00 2.00 +0.02 7600.00 12.30
LME Lead 1985.00 -17.00 -0.85 2035.00 -2.46
LME Nickel 17775.00 -355.00 -1.96 18710.00 -5.00
LME Tin 22550.00 50.00 +0.22 19200.00 17.45
LME Zinc 2035.00 14.00 +0.69 1845.00 10.30
SHFE Alu 16250.00 15.00 +0.09 15845.00 2.56
SHFE Cu* 60710.00 530.00 +0.88 55360.00 9.66
SHFE Zin 15640.00 150.00 +0.97 14795.00 5.71 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Additional reporting by Silvia Antonioli; Editing by William Hardy and Marguerita Choy)