Copper fell to its lowest in around a month on Thursday as the dollar rose on US jobless and home sales data and concerns deepened about China tightening its monetary policy, which would soften demand for metals. Three-month copper on the London Metals Exchange, fell to $9,281 a tonne and closed at $9,355, from a last quote of $9,570/$9,575 a tonne on Wednesday.
Copper struck a record $9,781 a tonne on Wednesday, bolstered by tighter world supply due to supply uncertainty and falling ore grades in major producing countries such as Chile. But the metal, used in power and construction, on Thursday ignored a surge in US home sales and a bigger than expected fall in jobless claims, which suggest an economic recovery is on track.
"The jobless claims and home sales should have helped provide some support, but I think the move is still primarily driven by worries about monetary tightening in China," Standard Chartered analyst Daniel Smith said. "That is still in the forefront of people's minds."
The dollar rallied broadly after the US data, making industrial metals more expensive for holders of other currencies. Data on Thursday showed China's annual gross domestic product growth sped up in the fourth quarter of 2010, to 9.8 percent from 9.6 percent in the third quarter.
While on the surface this should bode well for base metals demand, investors focused instead on the likelihood strong growth will prompt China to tighten its monetary policy. This could curb the country's buying power. "So risk is being taken off the table in all markets," Stephen Briggs, a commodities analyst at BNP Paribas in London, said. Copper's losses spread through the metals complex. Battery material lead closed at $2,437 a tonne from $2,531, and zinc was $2,330 a tonne from $2,390.
Copper stocks at LME warehouses last fell 1,225 tonnes to 380,525 tonnes, edging back from a recent rise that has slightly dented sentiment towards demand. LME lead stocks continued to rise, last climbing 2,425 tonnes to 264,350 tonnes.
The backwardation on lead - a premium for cash material over the three-month contract - was at $23 a tonne, down from $31 the day before and versus a contango of $0.5 in late December - a discount for cash over three-month material. Data out on Thursday showed a dominant position controlling 80-90 percent of stock warrants and cash contracts on London Metal Exchange (LME) lead, edging down after data on both Tuesday and Wednesday showed a dominant position holding more than 90 percent. Traders said the position would have a limited effect on prices.
"It's certainly unusual given the state of the oversupply in the market," RBC Capital's Alex Heath said of the dominant position. "Supply fundamentals don't suggest there's any shortage of lead at the moment." Tin was last quoted at $26,950/$27,000 a tonne from $26,900 and nickel closed at $25,750 a tonne from $25,655. Aluminium was $2,408 a tonne from $2,408.