METALS-Copper Steady, Aluminium Spreads Tighten

SINGAPORE, Aug. 17 -- Copper futures were little changed on Tuesday, with London metal steady after rising 1.3 percent in the previous session, buoyed by falling inventories, a softer dollar and gains in Chinese equities.

Three-month copper on the London Metal Exchange CMCU3 was flat at $7,250 a tonne at 0335 GMT, after rising almost $100 in the previous session.

Turnover was light -- less than 800 lots, a third of typical volumes for the time of day, but traders said the market's moribund performance may be tempting investors holding short positions to close out.

"The volumes are pretty poor. The market is undecided about where to go. In the past few days the market has been pretty short, but the longer we stay here, the more short covering we will see," a dealer in Hong Kong said.

"That might push things to $7,350, but the general direction is lower and I think we could target $7,150 to $7,000, given the 100- and 200-day moving averages are around $7,050."

Benchmark third-month Shanghai copper SCFc3 rose 10 yuan to 57,310 yuan.

The dollar was a fraction weaker versus the euro, trading around $1.2839 EUR=, with the single currency holding on to gains it made after below-consensus manufacturing activity reported by the New York Federal Reserve. 

"Metals are tracking the dollar and equities. Flat equities and a weaker greenback translate into marginally firmer metals," Joel Crane, analyst at Morgan Stanley in Melbourne, said.

Looking ahead, investors are watching for U.S. industrial output and housing numbers. The housing market, along with employment, have been the weak links in the U.S. recovery story.

Crane added: "Across the complex, metals have become a macro call. In that in environment nickel may well outperform, especially. It's an under-supplied market facing 5 percent demand growth."

LME nickel CMNI3, the best performing LME metal this year after tin, rose $50 to $21,600.

Three-month aluminium CMAL3 added $9 to $2,127, while cash prices MAL0 rose even more quickly.

"Nearby aluminium is very tight -- the spread had narrowed from $9 contango to $4.50 overnight," the Hong Kong trader said.

"The tightness is loaded toward the nearby dates but it's spreading further out," he said, noting a $5 backwardation between late September and October.