Copper ended flat on Friday, regaining losses after a devastating earthquake in Japan unsettled global markets and Chinese inflation data fuelled concerns over demand from the top consumer of the metal. Three-month copper on the London Metal Exchange closed at $9,190, from Thursday's close of $9,191. It hit an intraday low of $8,992, its lowest since around mid-December.
While data on Friday showed US retail sales posted their largest gain in four months in February, GFMS Metals Consulting Managing Director Neil Buxton said copper had recovered its losses because the earlier fall had been overdone.
"The market is picking and choosing which indicators it wants to respond to. In the extent of the earlier correction...it didn't need too much for a rebound in prices," Buxton said. "I think you've probably got to see it as part of a wider trend. The extreme volatility doesn't come as a huge surprise but the downward trend is still in place."
Japan's biggest earthquake on record rocked the country's north-east coast, triggering a 10-metre tsunami that killed hundreds of people and swept away everything in its path, including houses, ships and cars. February inflation in China topped expectations at 4.9 percent, and looked set to climb further, adding to pressure for more monetary tightening. This could limit economic growth and curb demand for industrial metals.
"To support the prices levels we saw earlier this month, you need a constant stream of bullish news, the news flow really has dried up and once it dries up, it leaves copper a bit exposed," Buxton said. On Thursday, data showed China's imports of copper fell 35 percent to 235,469 tonnes in February, from 364,240 tonnes the previous month.
"The earthquake is clearly risk-negative, and you have seen continuation of selling that has been going on all week. But there are plenty of other things to make the world unhappy," RBS global head of commodity and strategy Nick Moore said. Oil slid after the earthquake shut down dozens of plants in Japan, the world's third-largest oil consumer. High oil prices recently have raised concerns it could lead to high inflation, and crimp economic growth.
Inventories of copper on the London metal exchange rose 400 tonnes to 425,875 tonnes, data showed. Copper stocks have increased by over a fifth since mid-December. Copper was in an $18.50 contango, which is a discount for cash versus three-month material, compared with a $70 backwardation, or the opposite structure of a premium for cash, in mid-December.
The contango underlines the lack of spot demand for copper, especially from China, analysts said. Aluminium closed at $2,545, down from $2,585. "The only metal that is up on the month is aluminium," said Barclays in a note. "While the performance of front-end aluminium prices is impressive, far forward prices have been even stronger, leading to a widening of the contango across the forward curve." Stainless steel ingredient nickel was $26,095 from $26,050. Tin ended at $29,500 from $29,300 while zinc, used in galvanising, was $2,276 from $2,286 at Thursday's close. Battery material lead was $2,425 from $2,430.
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