Copper steadied by the close on Friday, recovering from an earlier three-month low, as investors reassessed the likely fallout from Japan's massive earthquake. An acceleration in Chinese inflation in February only added to the negative mood across the base complex, extending copper's weekly losses to as much as 10 percent before the sell-off began to show signs of fatigue.
"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," said GFMS Metals Consulting Managing Director Neil Buxton. Despite the late recovery, copper prices still managed to suffer their biggest weekly decline since early June 2010.
London Metal Exchange (LME) three-month copper eased $1 to close at $9,190 per tonne, recovering from an intraday low at $8,992, its lowest since mid-December. In after-hours trade, gains extended to near session highs at $9,260. COMEX copper for May delivery settled up 1.00 cent at $4.2075 per lb, near the upper end of its $4.0860 to $4.2195 session range.
The 8.9 magnitude quake that struck the north-east coast of Japan, the world's third largest economy, triggered a tsunami and killed at least 1,000 people, while power plants, oil refiners and ports were shut down. "We won't really know for a bit of time as to exactly how serious the economic damage is," said Peter Buchanan, commodities analyst and senior economist at CIBC in Toronto.
"The past pattern with disasters of that sort has been a near-term negative, but perhaps a positive at least as far as growth goes and also demand for commodities for when they start to rebuild things." Japan's two major copper smelters shut down operations due to power outages, raising concerns about supply disruptions. The impact of the quake stretched to Chile, where three big ports were expected to halt activities on Friday and led the world's top copper producer Codelco to send ships out to sea as a precaution pending a tsunami bound from Japan.
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. As a result, copper was pegged at a $18.50 contango, which is a discount for cash material versus three-month material, compared with a $70 backwardation, or the opposite structure of a premium for cash, in mid-December.
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