Copper fell on Thursday, but the metal remained supported near six-week highs after the European Central Bank (ECB) gave its backing to a concrete plan to help lower the borrowing costs of struggling euro zone countries. ECB President Mario Draghi said the institution agreed to launch a new and potentially unlimited bond-buying programme that would draw a line under the debt crisis that has shaken most economies.
Convincing measures to help solve the critical debt situation in the euro zone should spur the region's economic growth and boost demand for industrial metals. Three-month copper on the London Metal Exchange, untraded at the close, was bid at $7,700 per tonne, off a six-week high of $7,762, and down from a close of $7,740 on Wednesday.
"The fact that he (Draghi) omitted clear details spurred some liquidation (in copper) after the buying of the last few days," T-commodity consultant Gianclaudio Torlizzi said. The ECB held its main interest rate at a record low of 0.75 percent, holding fire after a pick-up in inflation last month offset pressure to breathe life into the flagging euro zone economy by easing borrowing costs. Copper also found support from a report that showed the number of Americans filing new claims for jobless benefits fell last week to its lowest level in a month, an upbeat signal for a labour market that has struggled to create enough jobs.
Still, the Organisation for Economic Co-operation and Development said the outlook for the Group of Seven major developed economies had darkened in recent months as the turmoil in the euro zone spread. It forecast economic growth of just 1.4 percent this year for the G7 as a whole.
Although LME copper stocks fell for the seventh consecutive session to hit their lowest level since October 2008, traders said demand for the industrial metal on the physical market remained sluggish. But weak production data could help mitigate the effects of dwindling demand.
The world's top copper producer, Chile's Codelco, for example, produced 767,000 tonnes of copper in the first half of the year, down 6.4 percent year-on-year. "Mine supply is not growing as much as expected, and that's part of the explanation for why copper has outperformed the other metals in the last few months and this year as a whole," Credit Suisse analyst Ivan Szpakowski said. In other metals, aluminium closed at $1,975 a tonne from $1,972 at the close on Wednesday. The metal used in packaging and transport hit a session high of $1,987.50, its highest since early July.
"Aluminium had been oversold in the last quarter in comparison with other metals," said Kamil Wlazly, a senior metals analyst at Metal Bulletin Research. But he added that prices were now well below the costs of production. Zinc, used to galvanise steel, closed at $1,908 from $1,891, and battery material lead at $2,048 from a last bid of $2,028. Tin ended at $19,725 from $19,700 and nickel at $16,060 from $16,100.
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