Copper prices slipped on Friday on a firmer dollar and as falling equity markets stoked persistent demand worries that were heightened by a flurry of mixed economic data. Benchmark copper on the London Metal Exchange closed at $6,480 a tonne from a close of $6,664.50 on Thursday, when the metal used in power and construction ended about 3 percent up on the day.
"The market is clearly confused," Daniel Brebner, an analyst at Deutsche Bank said. "You are getting good news followed by bad news, followed by mediocre news - so directionally it's challenging to arrive at any kind of conviction." "Generally very cautious. There is not a lot of significant positions being put on at this point," he added.
Friday's data showed US Midwest area manufacturing was strong, consumer spending fell in September for the first time in five months, while employment costs rose 0.4 percent in the third quarter. Copper prices have more than doubled in the year to date, boosted by a declining dollar, large fund flows and record import buying from China, the world's largest metals consumer.
More recently, worries the Chinese will reduce import buying in the fourth quarter have capped gains, especially as demand in the OECD cannot yet make up for reduced Chinese buying. "You've got deceleration in Chinese consumption in the next quarter or two (and) very moderate re-stocking in the OECD, which results in the possibility of demand disappointment that the market is factoring in already," said Deutsche's Brebner.
LME copper stocks continue rising, indicating weak demand outside China. Latest data showed stocks rose 800 tonnes to total 372,200, the highest level in more than five months. In Shanghai, copper stocks monitored by the Shanghai Futures Exchange rose 7 percent from one week earlier. "For the October (Chinese import) data there may be a big negative surprise," said Evolution Securities analyst Charles Kernot.
On Monday, copper touched a 13-month high of $6,732, and the metal is on track for a 5 percent monthly gain. Among other industrial metals, aluminium, used in transport and packaging, closed at $1,910 from $1,955. LME inventories fell 5,550 tonnes but remained near record levels of around 4.5 million tonnes. Inventories in Shanghai rose 2 percent on the week, while zinc stocks surged to 145,536 tonnes from 117,706 tonnes.
Zinc, used to galvanise steel, ended at $2,160 from $2,265, under pressure from the Shanghai stocks data. It earlier touched a one week low at $2,158, but still gained about 11 percent this month. Battery material lead ended at $2,305 from $2,365, tin hit a one week low at $14,530 but ended at $14,700 from $15,000 and steel-making ingredient nickel closed at $18,250 from $18,690. On the supply side, Norilsk Nickel, said it has cut its nickel output forecast for 2009 to 284,000 tonnes from previous 285,000-300,000 tonnes.