BASE METALS: Copper Slips After Volatile Day

NEW YORK, Mar 18, 2011 (Dow Jones Commodities News via Comtex) -- Copper ended a tad lower Friday as investors balanced the uplifting impact of a ceasefire in Libya with the damping news of Chinese credit tightening.

The most-actively traded copper contract, for May delivery, settled down 0.1%, or 0.5 cents, at $4.3390 a pound on the Comex division of the New York Mercantile Exchange. The thinly traded March-delivery contract was down 0.65 cent, or 0.2%, at $4.3295 a pound.

Libya ordered an immediate ceasefire in the wake of a United Nations resolution supporting a no-fly zone. The civilian death toll has been on the rise in Middle East nation since mid February, when forces loyal to leader Col. Moammar Gadhafi began executing attacks on antigovernment demonstrators.

The U.N.'s decision paves the way for international military action against Gadhafi's forces, and raises the likelihood of a peaceful resolution to the bloody conflict.

"The markets are cheering on the ceasefire in Libya, but the situation will continue to escalate and will probably see airstrikes," said Zeman. "Some of the wild rallies you've seen in recent days have been short covering, especially ahead of the weekend."

Copper prices also drew some support from a weaker dollar, which slipped after central banks from the Group of Seven industrialized nations, including the Federal Reserve, moved to stem the yen's rise. Japan's currency had climbed to an all-time record in the wake of last week's earthquake and tsunami.

A stronger yen added pressure on Japan's economy by making its exports more expensive abroad. The intervention is expected to aid Japanese exporters and boost the country's recovery effort, an encouraging thought for global investors.

Copper prices had tumbled as traders worried about lower-than-forecast demand from the world's fourth largest copper consumer, but talk of reconstruction demand soothed frazzled traders.

"We had a big rebound in the last two sessions on the notion that some of the panic selling was overdone," said Matt Zeman, head of metal trading at Kingsview Financial. Copper prices are up 4.9% from Monday's settlement low of $4.1370.

However, the red metal saw renewed pressure from China, the world's largest copper consumer. China again raised bank reserve requirements, fanning concerns that its inflation-fighting measures will ultimately curb demand for copper.

Rising inventories, an indication of weak physical demand for copper, also weighed on the market. Inventories of copper stored in London Metal Exchange warehouses rose 850 metric tons Friday, leaving them at 429,650. Once-a-week data released on Fridays by the Shanghai Futures Exchange showed a weekly rise of 19,111 metric tons to 177,365.