Copper falls on slow China demand

Copper fell on Thursday on signs of slow demand from top metals consumer China, which is returning to work after a week-long holiday, and concerns about the risk of a chaotic default in Greece. Benchmark copper on the London Metal Exchange (LME) closed at $8,345 from a close of $8,440 on Wednesday.
The concerns outweighed data signalling improvement in the US labour market and remarks from Federal Reserve Chairman Ben Bernanke that he was seeing signs some of the uncertainty dampening US business investment might be waning. The euro surrendered gains against the dollar, which was flat versus a basket of currencies. A stronger dollar makes commodities priced in the US unit more expensive for holders of other currencies.
But worries about a resolution to Europe's debt crisis remain, and dismal corporate results showed Europe's economy is suffering increasingly from the problems. Chinese consumers are also reluctant to buy copper at current levels. LME copper rose 9.5 percent last month, and the higher London prices against Shanghai's have discouraged imports.
"The recent price move was in anticipation of Chinese buying beyond the Lunar New Year. I think in the short term the danger is that people are going to be disappointed," said Nic Brown, head of commodity research at Natixis.
"Physical (copper) premiums (in China) are coming off. That to me is a clear indication that you have a build-up of copper in bonded warehouses, which suggests that the absolute levels of demand in China at the minute are not good." Credit Suisse said in a note: "For prices to increase further from here, demand indications like physical premia or stocks would in our view need to provide more visible evidence of an improved environment."
In industry news, miner Xstrata is in talks with Glencore over an all-share merger of equals, confirming reports of a deal that could create a combined mining and trading group worth more than 50 billion pounds ($79 billion). "The fact that sentiment amongst companies in the commodities sector is positive and that they expect higher prices in the long term is evident from a planned major acquisition in the sector," Commerzbank analysts said in a note. "A higher concentration on the producer side is likely to support prices in the medium to long term." Aluminium closed at $2,195 a tonne from a close of $2,265 on Wednesday, zinc at $2,095 from a close of $2,131, tin at $24,150 from $24,155, lead at $2,164 from $2,235 and nickel at $20,850 from $20,975.