Copper fell on Thursday, to its lowest in around a week, on concerns that the eurozone debt crisis is spreading from peripheral to key economies in the region and that it will hurt demand for industrial metals the longer it continues. Equities dipped on both sides of the Atlantic as Spain and France faced sharply higher borrowing costs, struggling with bond auctions that highlighted the threat of contagion from a debt crisis that began in Greece and is now threatening Italy.
But limiting losses in copper was data showing new US claims for jobless benefits hit a seven-month low last week, while permits for future home construction rebounded strongly last month, bolstering views the world's largest economy is gaining traction. Three-month copper on the London Metal Exchange closed at $7,545 a tonne from $7,730 on Wednesday. It hit $7,510 earlier, its lowest since last Friday.
"We'd be cautious about prospects for base metals going forward. Fundamentals for copper are positive but you get times in the pricing cycle where fundamentals can take a back seat," said Neil Buxton, managing director at ThomsonReuters-GFMS Metals Consulting. Signs of bank funding stress grew earlier as the eurozone sovereign debt crisis spread, with markets looking to the European Central Bank to take more dramatic action like unlimited buying of sovereign bonds, a measure it has been opposed to up until now.
In China, a big consumer of industrial metals, the Commerce Ministry cautioned that the country's export outlook could be grim for the rest of this year and the early part of 2012 as Europe struggles to contain its crisis and the United States tries to spur its fragile recovery.
Adding to investor caution, BHP Billiton, the world's biggest miner, has turned more wary on the outlook for commodity markets, warning on Thursday that customers are starting to face tighter access to trade finance and some are cutting production. But Credit Suisse analyst Stefan Graber pointed to pockets of news, including US manufacturing numbers on Tuesday, that have helped keep a floor under metals prices. A gauge of manufacturing in New York state rose this month for the first time since May as shipments improved even though new orders fell.
"There is some resilience in activity there which could help bring some stability, but the key factor to look at is still obviously Europe," Graber said. Stainless steel ingredient nickel ended at $18,150 a tonne from a close of $18,140, having lost nearly 28 percent of its value this year. The premium for cash nickel over the three-month price had widened to $35.
RBC said front-end spreads in nickel had been "bid very aggressively as a short had been unable to deliver material against their position and a dominant long has emerged in the physical warrants, tom and cash positions". Data on Thursday showed nickel inventories in LME-monitored warehouses are down 378 tonnes at a nearly three-year low of 83,220 tonnes.
Aluminium closed at $2,094 a tonne from $2,157, lead at $2,014 from $2,030, and tin was last bid at $21,350 from $21,700. Zinc, used to galvanise steel, closed at $1,927 from $1,960. Standard Bank said in a note that aluminium, which has lost 5 percent in November, could come under pressure as the eurozone debt crisis could dissuade banks from extending credit to finance the large tonnages of metal tied up in financing deals.