Copper prices closed down on Thursday with sentiment weighed down by rising stock levels and the metal was seen weak on the technical charts, analysts said.
Copper for delivery in three months on the London Metal Exchange ended at $6,800 per tonne, down 1.6 percent from $6,910 on Wednesday, when it hit a four-month low of $6,760.
Copper looked weak on the charts, indicating that the bears took a breather and the bulls were not strong enough to push the price higher, Dresdner Kleinwort said in a technical report.
"This is usually not the basis for a new upswing and more weakness might be in store," the report said. Copper stocks at LME-registered warehouses fell a touch, by 125 tonnes on Thursday to 151,950, but still well above levels around 25,000 in July last year.
"The market is absolutely transfixed by the rise in copper inventories," ABN Amro analyst Nick Moore said. "The other metals are receiving collateral damage....It's going lower." Moore added that rising supplies were being reflected in the rising copper contango - where the futures price is higher than the cash price - at around $34 a tonne.
In early October the market was in backwardation as the futures price was about $60 a tonne below the cash price. The market was watching developments in Zambia where Konkola Copper Mines (KCM) has suspended operations at its Nchanga open pit mine after a state body withdrew part of the company's licence in a pollution row.
As a result, production of 540 tonnes a day was suspended. "There is still a significant disruption risk, many forecasts for surpluses next year assume full or nearly full capacity," Numis Securities analyst John Meyer said.
The market shrugged off news that the largest union at Codelco Norte, the biggest division of the Chilean producer, had rejected a contract proposal in favour of full negotiations.
The division's oldest labour organisation, Union No 1, decided in a hand vote in a general assembly to go into regular talks with the company that could start on Friday, a source close to the talks told Reuters. "Copper will stay under pressure for a while," analyst Edward Meir at Man Financial said. More than 6,000 workers at Codelco Norte, producing some 964,000 tonnes of copper cathodes annually, are in negotiations to renew three-year contracts that expire on December 31.
"Depending on the strike talks, copper could go further down to $6,500-$6,600," Meir added. Meanwhile, Codelco is offering refined copper to Chinese consumers at a premium of $130 a tonne for delivery in 2007, up from $125 to $128 a tonne this year, trader sources said.
Aluminium ended lower at $2,677 from $2,698. "Aluminium is still in a critical technical situation," Dresdner Kleinwort said, pointing to the metal being in a consolidation phase at best. Zinc closed $20 firmer at $4,220, supported by a market in deficit by 304,000 tonnes in January to September.
Global refined zinc consumption rose to 8.208 million tonnes in the first nine months of 2006 from 7.866 million a year earlier, the latest monthly bulletin from the International Lead and Zinc Study Group (ILZSG) said.
Lead was up $15 at $1,535 and nickel was untraded, indicated at $29,600/29,700 versus $29,650, while tin was quoted at $9,750/9,800, up from $9,650.