Copper fell on Thursday as disappointing US macroeconomic data reinforced worries about an economic slowdown and prospects for growth and demand, with a stronger dollar also undermining sentiment. Benchmark copper closed at $8,774 a tonne, down from $8,970 a tonne at the close on Wednesday.
The metal used in power and construction earlier on Thursday hit a session low of $8,750 a tonne, its lowest level in a week. Other industrial metals also succumbed, with aluminium hitting its lowest level since late December, at $2,338 a tonne. Data from the United States, the world's largest economy, showed new claims for unemployment benefits rose more than expected last week, and other figures showed factory activity in the US Mid-Atlantic region fell to the lowest level since March 2009.
"There is a gradual deceleration in growth and that is going to keep the market on the defensive into the balance of the year," said Edward Meir, analyst at MF Global. "I suspect in the weeks ahead more and more attention will be paid to macroeconomic numbers as opposed to the dollar."
Reflecting investors' unease, European shares suffered their biggest daily fall since March 2009, while gold surged to record highs as risk aversion took hold. Caution in financial markets helped push the dollar higher against a basket of currencies, making commodities priced in the US unit more expensive for holders of other currencies. Debt crises in the eurozone and the United States have in recent weeks hit the copper price, which is down almost 11 percent since August 1, when it touched $9,905 a tonne, the highest since April.
Highlighting growing concerns about the outlook for the global economy, Morgan Stanley slashed its global growth forecast for 2011 and 2012, saying the US and the eurozone were "dangerously close to a recession". Moves by China to tighten monetary policy in a bid to rein in stubbornly high inflation have meant curbs on economic activity and fears of slower demand growth for industrial metals.
"The jury is still out on Chinese demand," a LME trader said Stocks of copper in LME-registered warehouses fell 1,650 tonnes to 462,975 tonnes, while those for aluminium rose 6,825 tonnes to above 4.56 million tonnes. Aluminium was untraded at the close, but bid at $2,338 a tonne from $2,395 on Wednesday. Despite the price fall, the metal is seen supported by strong demand in China, which again accounts for nearly 40 percent of global consumption, estimated this year at above 40 million tonnes.
Healthy Chinese consumption can be seen in stocks of aluminium monitored by the Shanghai Futures Exchange, which at around 150,000 tonnes are about half the level of early June. "Local warehouses (in China) have seen a significant inventory drawdown so far this year as vertically integrated producers absorbed a significant portion of domestic output," Credit Suisse said in a note. Tin fell more than 5 percent to $22,698 a tonne, and closed at $22,750 from Wednesday's close of $24,005. Zinc fell to $2,178 from $2,215, and lead to $2,301 from $2,366. Nickel fell to $21,300 from $21,950.