Copper dips

Copper slipped from near three-month highs on Thursday as the recent fall in inventories was overshadowed by more gloomy economic data, denting the outlook for metals consumption. A continuous fall in copper stocks over the past week and a rise in cancelled warrants - material earmarked for delivery - had suggested there could be an improvement in demand, particularly from China.
These factors pushed the metal to its highest in more than three months on Wednesday. Copper for three-month delivery on the London Metal Exchange closed at $3,680 a tonne, versus $3,745 on Wednesday, when it touched $3,785 a tonne, its highest level since November 27. LME copper stocks fell a small 825 tonnes to 525,200 tonnes after having dropped by 3 percent over the past week.
Cancelled warrants fell to 60,775 tonnes from Wednesdays 64,400 tonnes, marking the first drop in over a week. The major question in the market is whether the rise in cancelled warrants is due to a start of an improvement in demand from China or a result of an arbitrage opportunity - buying metal cheaply on the LME to sell at a profit in China.
Li Yihuang, president of Jiangxi Copper group, said Chinas copper consumption will rise in 2009 but growth will slow from 2008. He said the consumption growth should "very closely" track the countrys gross domestic product growth. Traders were looking for clues on the next move from the economy of China, the commodity power house. "Are we seeing the start of a recovery?" said an LME trader. "Jurys still out.
Prices in the red metal tracked back from a low of $3,650 as US factory order data was better than analysts expectations. Outside China, economic data points to a deep recession. A collapse in exports, and plunging household demand and investment combined to produce the deepest ever quarterly economic contraction in the eurozone in the last three months of 2008, data showed.
In industry news, the worlds eighth-biggest copper producer Kazakhmys said it planned to reduce output this year to cut costs and to hedge - or sell in advance at fixed prices - 7,500 tonnes of copper each month for the rest of 2009 to guard against copper falling below $3,000 per tonne. Aluminium closed at $1,321 a tonne in rings from $1,345 a tonne, with inventories posting another rise of 4,700 tonnes, bringing the total amount to 3.26 million tonnes.
Zinc ended at $1,243 from $1,224 a tonne, while battery material lead was up $4 at $1,184 a tonne. Tin was softer at $10,900 a tonne from $10,950 a tonne and key stainless steel ingredient nickel fell to $9,825 a tonne from $10,025.