Copper prices fall from 2-month high

Copper fell on Tuesday as traders took profits and investors were rattled by political turmoil in Italy, but the metal was underpinned by a weaker dollar and faster growth in factory output in big metals consumer China.

Investors are also focusing on a US Federal Reserve meeting on Wednesday. It is expected to extend its asset purchase scheme and commit to buy $45 billion of US debt per month.

Three-month copper on the London Metal Exchange was $8,100 a tonne in official rings, trimming gains from the previous session when it hit its highest since October 19 at $8,159 a tonne. It closed at $8,140 on Monday.

Copper prices have risen more than seven per cent since mid November. “I think what we're seeing is new activity coming into the base metals from the long side. I don't think it's being done on the basis of fundamentals, it's much more technical in nature,” said Barclays analyst Gayle Berry.

“Fundamentally the feedback from China is still pretty soft. Everything apart from tin is in a surplus, stocks for most metals are rising, and there's not really much indication of any significant improvement in Chinese demand.”

China's copper imports rose 13.5 per cent in November from the previous month. But the latest figures were boosted by the arrival of delayed shipments after a week-long holiday in October and overall demand for the metal remains weak.

Imports had dropped 18.5 per cent month-on-month in October because of the National Day holiday.

China’s production of refined copper also rose in November to a record high for the second straight month, which would also tend to dampen prices. China accounts for around 40 per cent of the global refined copper demand. However, China’s economy, the world's second largest, may be on a bumpy road to recovery.

Economic data over the weekend showed factory output and retail sales rose at their fastest pace in eight months in November, fuelling hopes that the country is snapping out of a seven-quarter long slide.

A weaker dollar also helped support base metals.

The euro rose broadly after forecast-beating German data lifted sentiment towards the currency while investors steered clear of the U.S. dollar before the Fed's meeting. A weaker dollar makes metals priced in the currency less expensive for holder of other currencies.

The euro found some support after Italian Prime Minister Mario Monti played down market fears over his decision to resign, saying there was no danger of a vacuum ahead of an election in the spring.

Three-month tin also fell on Tuesday after a 6 percent surge on Monday that was driven by a 28 percent fall in shipments of refined tin from Indonesia, the world's top exporter, in November from the previous month.

"We would expect tin prices to be fairly choppy over the next few days as long-term, technical funds buy dips and trade/macro players look to sell any rally," RBC said in a research note.

"In looking at the Indonesian export numbers, we would point out that November 2011 saw a pretty dramatic drop in exports ) and then December saw heavy export volumes, so in fact there has actually been a year-on-year increase," it said in the note.

ANZ also said that the breakout in tin looked unsustainable. "We think prices could ease back to $22,600/t from $23,090 last bid at the close on Monday," it said in a research note.

Three-month tin was $23,300 per tonne in rings from a last bid of $23,090 on Monday.

Battery material lead was $2,295 in rings, and is within reach of a 2012 peak of $2,329 a tonne. Inventories of the metal in warehouses monitored by the LME fell 2,025 tonnes to 352,900 tonnes, the lowest in about a month.

Three-month aluminium was at $2,133.5 per tonne from a last bid of $2,131. Zinc was $2,083 from $2,085 a nd nickel was $17,700 from $17,775.