Copper futures in New York ended down but off their session lows on Friday, after a morning sell-off failed to build momentum following weaker-than-expected US manufacturing data, analysts said.
"In our opinion, the market moved just as you thought it might, with is a knee-jerk reaction sell-off on the back of the number and then obviously some short-covering going into the close," said David Meger, metals analyst with Alaron Trading.
Copper for March delivery ended down 2.35 cents at $3.1720 a lb on the New York Mercantile Exchange's COMEX division, after dealing between $3.1410 and $3.20.
Technicians pegged initial resistance in March copper at the session peak at $3.20, followed by $3.40. Support was seen at $3.10, $3.05 and then the psychological $3.00 level, they said.
Spot December lost 2.45 cents to finish the day at $3.1470, while back month contracts closed in the red, from down 2.35 to 8.90 cents. Final COMEX copper futures volume was estimated at 8,000 lots, against the 11,480 lots recorded on Thursday.
The Institute for Supply Management said its index of national factory activity came in below market expectations at 49.5 in November from 51.2 in October. It is the first time the index has fallen below the 50-point threshold dividing expanding activity from a contraction in more than three years. Analysts noted that despite not having the driving demand force seen behind the market's run to all-time record highs in May, physical demand for the red metal has still been adequate enough to keep prices buoyant above $3.00 a lb. "There is definitely significant buying into what the market is going to view as value, so any of those hard dips are still being views as buying opportunities," Meger said, adding that a change in market mentality seemed to be taking hold where traders can now wait for a dip in prices as opposed to chasing the market.
London Metal Exchange-monitored warehouse stocks rose by 1,375 tonnes to 156,725 tonnes on Friday, while COMEX inventories increased 679 short tons to 31,627 tons on Thursday.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 4,410 tonnes, or by 16 percent, to 22,731 tonnes in the week ended Thursday.
Supply-side fundamentals continued to be a supportive factor in the market, with uncertainty over labour talks at Chile's Codelco Norte and expectations of lower production from Collahuasi, Chile's third-largest copper mine, limiting hefty price declines.
Looking at production, Peru's Antamina mine, one of the world's biggest producers of copper and zinc, expects 2006 and 2007 copper output to remain flat, a company executive said on Friday.
Meanwhile, copper miner Grupo Mexico expects to "significantly" raise its copper output in 2007 as mine expansions come on line in Peru but warned of slower profit growth after dramatic increases earlier this year.
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