Copper slipped on Thursday on the London Metal Exchange, as concerns over the health of the world's largest economy, the United States, offset worries over supply constraints and prospects of improving demand growth in the second half in Asia. Three-month copper on the LME finished at $9,630 a tonne, 0.20 percent down from a close of $9,650 a tonne on Wednesday.
The metal, used mainly in power and construction, rallied to $9,789.75 last week, its highest since early April and within five percent of its all-time $10,190 peak hit in February. "It is very clear that whether it is the US or the world economy, there is a soft patch," said Nic Brown, head of commodity research at Natixis.
The number of Americans claiming initial unemployment benefits dropped last week, but remained elevated and retail sales barely rose, suggesting the US economy would struggle to regain speed in the second half. "It's hard to pin down what is behind the soft patch, whether it's fiscal austerity, or the supply chain disruptions due to the Japan tsunami or the negative impact of the high energy prices," Brown added.
Also supporting base metals, data this week showed still robust economic growth in China, the world's top consumer of the metal, despite a series of tightening measures. This eased concerns that stricter monetary policy will severely hit copper consumption. China accounted for almost 40 percent of refined copper demand last year. Lower ore grades and strikes at the world's top producers, including Codelco in Chile and Freeport McMoRan Copper & Gold's continue to dog the outlook for copper supply growth, said Standard Chartered's Dan Smith.
"There's a lot of problems simmering in the background. It's an old story but things seem to be getting worse rather than better," he added. Global miner Rio Tinto said its mined copper was down 24 percent on the second quarter of 2010, primarily reflecting lower grades at its 30 percent-owned Escondida mine and wholly-owned Kennecott Utah Copper division.
Concern about the eurozone's own problems over delays to policymakers' plans to discuss the region's deepening debt also grew after Fitch downgraded Greece deeper into junk territory on Wednesday. Earlier, comments by US Federal Reserve Chairman Ben Bernanke that there could be further stimulus if needed, had weighed on the dollar and aided metals, said Commerzbank. LME nickel stocks have trended down since January to near 100,000 tonnes, the lowest in more than two years, falling by nearly 37,000 tonnes.
"This performance is in-line with our expectations given that the refined nickel market has been the only base metal in a market deficit," it said. Nickel closed at $24,210 from $23,975. Zinc, used to galvanise steel ended at $2,350 from $2,361 at Wednesday's close. Battery material lead finished at $2,665 from $2,701 and aluminium was at $2,507 from $2,513. Tin closed at $27,425 from $27,400. Adding to support for prices, Indonesia's Timah, the world's largest integrated tin miner, expects a slight decline in sales, according to a local newspaper report. Production and sales of refined tin were forecast to reach 40,000 tonnes in 2011, down slightly from 40,413 tonnes in 2010 due to competition from illegal miners in the main producing island of Bangka and Belitung.