Copper fell on Friday, notching up its second week of losses, reflecting scant demand from top industrial metals consumer China, but prospects of Greece securing a second bailout and a firm euro helped limit further losses. Benchmark copper on the London Metal Exchange (LME) closed at $8,175 a tonne, down from Thursday's close of $8,300.
Optimism grew on Friday that Greece has finally done enough to secure a second bailout after it set out extra budget savings. "Hopes of financial assistance for Greece are driving the market; the market is quite optimistic today but the recovery is fragile and we should be prepared to see lower prices," said Commerzbank analyst Daniel Briesemann. "If you take a look at China you can see a continuous build-up in inventory levels which shows that demand is cooling down a little bit in China."
Copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 9.6 percent to 217,142 tonnes this week, the highest since mid-2002, weekly data released by the exchange showed on Friday. But there is evidence of sustained recovery momentum in the US economy.
US data on Thursday showed jobless claims falling to a near four-year low, solid growth in factory activity in the Mid-Atlantic area and a faster-than-expected rise in housing starts. Also underpinning copper, the euro climbed against the dollar on hopes for a rescue package for Greece, but gains were capped before a key meeting on Monday that could nail down an agreement.
China consumes about 40 percent of the global copper supply. "The passing of the early China New Year break has revealed thin markets for copper and no great benefactors in the form of the Chinese consumer," Credit Suisse said in a research note. "Although one market participant we spoke to had described the current physical market conditions as horrible, most observers agree that consumers are generally holding back in expectation of better bargains ahead on prices."
Falling copper inventories in LME-monitored warehouses however were pointing to stronger demand especially in the United States. Stocks fell by 4,750 tonnes to a fresh 2-1/2 year low of 306,375 tonnes, latest data showed. Aluminium closed at $2,164 from $2,160. A recent surge in imports of primary aluminium by China, the world's top producer and consumer of the metal, could hit a wall in April as weak domestic prices drive traders to cut new orders for spot metal, trading sources said on Friday.
Tin ended at $23,475 from $24,005 while zinc closed at $1,945 from $1,978 Thursday's close. China has raised a resource tax on iron, tin, molybdenum, magnesium, talc, and boron in a move aimed at conserving resources and curbing pollution, an official newspaper said. Lead closed at $2,045 from $2,015 and nickel at $19,650 from $19,900.