LONDON: Copper prices declined on Thursday as traders cashed-in recent gains after disappointing Chinese copper import figures, but further falls were prevented by shrinking supplies and lingering optimism about demand for industrial metals.
Benchmark London Metal Exchange (LME) copper slipped 0.6 percent to trade at $7,087 a tonne at 0958 GMT.
The prospects for global economic recovery have gathered pace following last week's encouraging U.S. jobs data and upbeat factory numbers from China that reinforced expectations of a pickup in demand for industrial metals.
Prices for the metal used in power and construction hit a 4-1/2 month high earlier this week at $7,212 a tonne.
In top copper consumer China, data showed its trade performance improved in June but still missed market forecasts, reinforcing expectations that Beijing will have to unveil more stimulus measures to stabilise the economy.
In a bearish sign for copper, China's copper imports fell in June to the lowest since April 2013 as Chinese banks reduced lending for metals imports following a probe into alleged fraudulent metals financing at Qingdao port.
"At the moment, there is some profit-taking triggered by the weak Chinese imports for June. The market had been building up expectations based on the recent positive data but the import numbers failed to surprise on the upside," said Eugen Weinberg, head of commodities research at Comerzbank.
"But in general people are still optimistic about the outlook for China and there are good reasons for it. The authorities are standing by the goal of 7.5 percent growth. There is still a potential for industrial metals to go higher."
Given an unusually synchronised rally across stocks, bonds and commodities in the first half, commodities are attracting fresh investment as the best potential shield should there be a correction, said analyst Ed Meir of INTL FC Stone in New York.
"We suspect that if there is some fallout ahead or decoupling, the commodity sector should be able to hold its ground, as it has been a perennial laggard for the past 4 years and nearly nowhere as overbought as the other two sectors," he said. "I think that will bring in continued fund interest."
SHRINKING SUPPLIES
Highlighting the dwindling stocks, copper inventory levels in LME-registered warehouses, at 158,100 tonnes, are at their lowest in nearly six years, having steadily fallen in the last 12 months.
"The trend of metals financing activity shifting to locations outside of mainland China, most notably Malaysia and Singapore, has accelerated over the past month as financing in Chinese bonded warehouses has become more difficult," Citigroup analysts said in a note.
"This should see more inventory build outside of China rather than in bonded warehouses going forward."
Chile's Codelco has asked certain buyers of refined copper in China to cancel some term shipments scheduled for delivery in the second half of the year as the firm processes less ore from a new mine, three sources said.
In other metals, aluminium fell 1.1 percent to $1,917 a tonne, having touched a 13-month peak of $1,959 in the previous session, while zinc fell 0.8 percent to $2,264 a tonne, having hit a three-year high of $2,318.50 hit earlier in the week.
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