US copper futures ended mixed in thin business on Thursday after an assortment of outside market influences held some investors on the sidelines amid an increase in volatility, analysts said.
"It was very choppy, with basically red metal traders reacting to divergent influences from across the spectrum," said Dan Vaught futures analyst with A.G. Edwards.
Coppers for May delivery eked out a 0.25 cent gain at the close to $2.7545 a lb on the New York Mercantile Exchange's Comex division, after dealing between $2.7350 and $2.8180. Spot March ended up 0.35 cent at $2.7365.
Deferred or back months closed mixed, from unchanged to down 1.05 cents. Business was Very light with final estimated Comex copper futures volumes totalling only 5,500 lots. On Wednesday, final futures volumes reached 14,895 lots.
As of February 28, open interest in Comex copper futures fell 174 lots to 65,689 contracts. Copper futures in New York garnered support from the general strength seen in London following another large drawdown in London Metal Exchange copper stockpiles and a firmer tone in the precious metals complex.
"The numbers this seemed relatively supportive as well," Vaught added, referring to the Institute of Supply Management's stronger-than-expected reading of manufacturing activity in February, which rose to 52.3 from 49.3 in January, above economists' median forecast for a slight rise to 50.0, which indicates growth in the sector.
However, a deeper-than-expected 0.8 percent drop in US construction spending during the month of January continued to cast a shadow on the health of the housing sector. Ongoing investor aversion to risk was seen as another problem plaguing copper futures trading on Thursday, as some investors were reluctant to return to the market following this week's global equity sell-off sparked by the near-9 percent plunge in China's Shanghai Composite.
"It reminds me of the adage, 'I'd rather be out of the market wishing I were in than in the market wishing I were out,'" said one base metals broker based in New York. However, the mild sell-off witnessed in copper futures this week was seen as a well-deserved break following a 20 percent rally from the February lows.
"Overall however we feel that the weakness of late was on the cards before the sell-off in equities took hold and that a period of consolidation will help unwind some of the overbought condition that most of the metals had found themselves in," said William Adams, metals analyst with BaseMetals.com.
Fundamentally, renewed Chinese interest in copper this year, reflected in strong import figures, was seen underpinning the February rebound, traders said. The world's top copper consumer's refined copper imports jumped 86.3 percent to 131,851 tonnes in January compared with a year, and are 37.6 percent higher than the 95,831 tonnes imported in December.
On the production front, Chile's Codelco, the biggest copper miner in the world, said on Thursday it produced 1.783 million tonnes of the metal last year, down 2.6 percent from 1.831 million tonnes in 2005. Meanwhile, copper production at Peru's Cerro Verde mine will likely more than double to 250,000 tonnes in 2007 due to a major expansion project coming on line.
London Metal Exchange (LME) copper warehouse stocks declined 2,575 tonnes to 205,400 tonnes on Thursday, while Comex stocks were unchanged at 36,994 short tons on Wednesday. LME three-month copper closed at $6,110 a tonne, up $95 or 1.6 percent from Wednesday's kerb close.