After a day of outperformance due to strong imports data in China, the world's biggest metal consumer, prices for base metals retreated Tuesday. In February, refined copper imports in China surged 50% mom to a record high of 270.9K metric tons, the highest since 2002, while purchases of zinc also rose 8 times to 77.2K tons, the highest since 2005.

The data shot copper price to 4-month high at 4135 before closing at 4060. LME prices (3M) for copper, zinc and lead rose to 1.5%, 2.3%, 1.8%, respectively to $4060/ton, $1293/ton, $1349/ton while that for aluminum and nickel lost more than 1% yesterday. However, we believe the increase in import was more a result of Strategic Reserve Bureau stockpiling rather than increase in domestic demand.

Moreover, the copper semis exports remains in downtrend. We see the trend will continue in the near term and this will impose negative effect on demand, and hence price, for its feedstock: copper.

Although copper or zinc prices may lead the LME metal complex higher if the euro continues to trade higher against the dollar, we advise profit-taking on every rally as we haven't seen evidence on real demand recovery yet.

Aluminum price failed to perform well due to disappointing imports decline by - 26.2% mom and -0.5% yoy. Although production cuts have taken place worldwide, the pace of supply reduction is slower than demand deterioration.

Gold price slides further in European morning. Currently trading at 930, the precious metal for April delivery has dropped 2.45 from Monday's close of 952.5 on profit-taking and rallies in stock markets. Assets in the SPDR Gold Trust plunged to 1 114.3 metric tons, the first drop since Mar 6, yesterday from a record of 1114.6 metric tons on March 20. Moreover, the dollar rebounds after pressuring for several days. The dollar index gains 0.58% to 83.9. Against the euro, the greenback also recovers to 1.3541 from yesterday's close of 1.3622.

Crude oil price also pulls back on dollar's recovery. Moreover, the market's speculations that crude inventory will gain for another week also weighed on the market. According to Bloomberg, crude stockpile for the week ended Mar 20 probably rose 1.1 mmb while inventory on both of gasoline and distillate drew by 0.5 mmb.