Copper declines

Copper fell on Thursday as a rally sparked by the surprise injection of liquidity into the financial system by central banks ran out of steam, although the decline was limited by upbeat data in the United States, the world's largest economy. The pace of growth in the US manufacturing sector picked up in November at its strongest level since June, data showed earlier, while US construction spending increased more than expected in October.
Benchmark three-month copper on the London Metal Exchange ended at $7,790 per tonne from $7,885 at the close. It hit a four-week high on Wednesday and trade volumes shot up to almost double the 50-day moving average, amplified by short covering. "After such a sharp move on what (the central bank action) was basically an item out of the blue, you're always going to get profit taking," said Stephen Briggs, analyst at BNP Paribas.
"Also people are thinking this is positive but in itself it doesn't solve the eurozone problem." A co-ordinated move by global central banks to keep funds flowing through financial markets that are being rocked by the eurozone's escalating sovereign debt crisis helped copper jump more than 5 percent on Wednesday.
The metal gave back some gains early Thursday, however, weighed by data showing that slumping export demand stalled manufacturing in some of Asia's biggest economies, while in the eurozone the sector contracted at its fastest pace in two years last month. China's official purchasing managers' index for November fell to 49. The data came one day after Beijing boosted markets by lowering banks' reserve requirements by 50 basis points to try to ease credit strains.
"That move came earlier, and was more substantive than we had anticipated," said Duncan Hobbs, senior commodities and mining analyst at Macquarie. Workers at Chile's giant Collahuasi mine ended a two-day labour stoppage that disrupted output, the operator and union of the world's No 3 copper mine said on Wednesday.
Tin was the biggest loser among the base metals after breakaway Indonesian smelters shipped metal in contravention of the industry's self-imposed ban on shipments from the world's top exporter. Three-month tin closed at $20,100 per tonne from $20,900 on Wednesday.
Smelters in Indonesia's main tin producing region of Bangka island stopped shipments from October 1 in an effort to push benchmark tin prices above $23,000 a tonne. "The ITA's tin export moratorium is now looking increasingly fragile and a normalisation of the Indonesian export flow before the year end is becoming more likely," Credit Suisse said in a note.
Headline inventories of the metal in LME-monitored warehouses at 12,150 tonnes are the lowest in 13 months and have shrunk by around half since August. Bucking the trend, aluminium closed up at $2,145 per tonne from $2,110, as funds piled into the metal at the start of the month on the view that it is cheaply valued relative to its peers. The fund buys caused shorts to cover, traders said.
Aluminium is trading below many producers break-even levels, leading many analyst to forecast production cuts. Norsk Hydro said earlier this month would not restart idled capacity at its Sunndal smelter in Norway until conditions picked up. Also helping the metal was news that sentiment is warming in China's aluminium market after industry players interpreted a cut in the amount of money banks must keep as reserves as a sign that local credit could improve in 2012.
Three-month lead was at $2,105 a tonne from $2,110. Inventories of lead in LME-monitored warehouses fell 575 tonnes to 369,250 tonnes as cancelled warrants, or new orders, jumped to nearly 6,000 tonnes into Singapore and 7,000 in Johor. Nickel was at $16,785 from $17,500, and zinc was at $2,045 from $2,072.