Copper dropped on Friday after US jobs data kept alive speculation about a US rate hike later this year, boosting the dollar ahead of the Lunar New Year holiday in China. The dollar index bounced back from a week of heavy losses after a mixed US jobs report, which included a fall in the unemployment rate to 4.9 percent, the lowest since February 2008. A stronger dollar makes commodities priced in the US currency more expensive for buyers outside the United States.
"That dollar weakness earlier this week really buoyed the metals complex and now some of that is coming off. There's a bit of profit taking, closing out these long positions ahead of the weekend and the Chinese new year," said analyst Kash Kamal at broker Sucden Financial. Three-month copper on the London Metal Exchange closed down 1.2 percent at $4,630 a tonne, erasing similar gains in the previous session when prices hit the highest since January 4 at $4,720 a tonne.
Copper has rebounded 7 percent since hitting 6-1/2-year lows in mid-January. Also weighing on prices ahead of the holiday was a surge in weekly inventories of copper, zinc and lead in Shanghai Futures Exchange (ShFE) warehouses. Copper stocks jumped 29,317 tonnes, or 13.8 percent, zinc stocks rose 6.6 percent, while lead stocks more than doubled, reversing the fall from the prior week.
Copper and other base metals, however, are likely to bounce back when the Chinese return from holidays, said Eugen Weinberg, head of commodity research at Commerzbank. Friday was the last trading session on ShFE before the holidays. It will resume on Monday February 15. "I wouldn't be surprised to see this recovery to continue going forward. The fundamental data will support the recovery because we're likely to have problems on the production side and on the other hand, demand seems to be a much better shape than many feared."
Given price-related cutbacks and shutdowns announced in the past six months, consultancy CRU anticipates a loss of 610,000 tonnes of contained copper from mine production this year. LME zinc, the best performer on the exchange so far this year, shed 2.2 percent to finish at $1,677 a tonne, but still gained over 3 percent during the week. Aluminium fell 2.3 percent to end at $1,500, lead gave up 1.8 percent to close at $1,770, nickel tumbled 4.4 percent to $8,160 while tin bucked the weaker trend and added 1 percent to reach $15,150.
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