Copper steadied on Friday as investors digested a mixed bag of data and weighed weak fundamentals against optimism about potential economic recovery.
Copper for three-month delivery on the London Metal Exchange was at $5,115 a tonne in official rings, from a close of $5,130 on Thursday. It traded between a range of $5,062 and $5,140, having earlier flirted with a one-week high.
An aggressive buying exercise by China, the world's top copper consumer, has helped prices of the metal rise more than 65 percent so far this year. But analysts warn this floor is falling away as China winds down its restocking process.
"We're going to pull back, we've run ahead of ourselves a little bit," said Andrey Kryuchenkov, an analyst at VTB Capital.
A traditionally slower demand season in China in the next two months will likely add further pressure to prices.
"We could have another push on copper if Chinese buying comes back in the fourth quarter. You need Chinese buying to come again to help this market, because demand won't come yet from the United States or Europe," he added.
Sentiment in equities and industrial metals has perked up this week after encouraging U.S. data, including a better economic outlook from the OECD and data showing U.S. durable goods orders rose unexpectedly.
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But caution also set in this week, when the U.S. Federal Reserve said the economy would remain weak for a time. Adding to concerns on Friday that economic recovery was far from secured was data showing Japanese consumer prices fell at a record pace in the year to May.
With the demand outlook remaining weak, analysts widely expect copper to come under pressure in the coming months.
"As evidence of slower Chinese imports emerge we expect prices to come under further downward pressure, though downside potential is limited to the mid-$4,000s," Barclays Capital said in a note.
Among other industrial metals, aluminium, used in transport and packaging, was at $1,675.5 from $1,684. The metal is on track for its biggest monthly gain since May 1988.
But the demand outlook remained grim as stocks of the metal, injured by turmoil in the autos sector, jumped 20,500 tonnes to approach a record high near 4.4 million tonnes.
For graphics on aluminium stocks, copper and zinc, click on:
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In South Korea, Asia's third-largest buyer of base metals, the government has increased its 2009 reserve stockpiling plan on six major metals by 6.2 percent to 199,800 tonnes because it expects prices to rebound sharply next year.
Zinc was at $1,615 from $1,643 and battery material lead was at $1,735 from $1,738. Nickel was quoted at $15,900/15,905 from $15,625. Extending recent gains, it reached $15,920, its highest since early October.
Tin traded at $14,925 from $14,825. Tin slipped back into a backwardation of $70/120 — a premium for cash material over the 3-month contract — with investors eyeing potential tightness in the market as data showed 5 percent of total tin stocks being tagged for delivery.
Total LME stocks of tin stood at 16,995 tonnes while the tagged metal — cancelled warrants — stood at 860 tonnes versus 1,280 tonnes on Wednesday.
