Copper and other metals prices fell on Thursday on worries about excess supply and after US central bank authorities gave more signals of a looming rate hike. Inventories of both copper and nickel in London Metal Exchange (LME) warehouses continued to increase on Tuesday with nickel hitting a record, evidence of the ample supply.
"Macro forces are largely dominating the market today, and over the near term, market attention will remain fixated on Greece and the Fed," said Xiao Fu, head of commodity market strategy at Bank of China International in London. Three-month copper on the LME closed 1.6 percent lower at $5,390 a tonne, having earlier fallen to a session low of $5,346 - not far from Monday's 5-1/2 year trough of $5,339.50 a tonne.
The Federal Reserve on Wednesday said the US economy was expanding "at a solid pace" with strong job gains, in a signal that the central bank remains on track with plans to raise interest rates this year. News that top metals consumer China plans to cut its economic growth target to the lowest in 11 years at around 7 percent in 2015 also tainted sentiment.
"Copper is drifting around looking for direction, but bias is to the downside in Asia, particularly from investors in this region," said analyst Daniel Hynes of ANZ in Sydney. "The Asian market certainly sees weaker demand particularly through the first half of the year."
In a signal of dwindling demand for physical metal in China that could undermine LME prices, physical copper in the local market was trading at a discount to the front month ShFE futures contract on Wednesday. LME copper and nickel inventories climbed again on Thursday, adding 2,775 tonnes and 1,836 tonnes respectively. Copper stocks are up more than a third so far this month and nickel touched a record at 425,562 tonnes.
Copper failed to get much support even after three industry sources told Reuters that China's stockpiler plans to buy about 200,000 tonnes of refined copper in 2015 from the international market. Nickel fell 0.9 percent to $14,900 a tonne.
"Even though nickel ore stocks at Chinese ports have declined for 10 consecutive weeks, the prices of nickel ore, nickel pig iron and stainless steel have also been declining, which shows that demand has been weak," Fu said. Aluminium closed 1.8 percent lower at $1,819 a tonne, zinc shed 1.3 percent to end at $2,090 and lead closed 1.4 percent lower at $1,860 a tonne. Tin, untraded at the close, was bid at $19,150 a tonne, down 0.5 percent.
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