Copper rose on Thursday, clawing back some of the previous day's losses, as data suggesting that top metals consumer China will avoid a sharp economic slowdown boosted risk appetite and overshadowed concerns over Europe's debt crisis. London Metal Exchange (LME) three-month copper rose 1.54 percent to end at $8,630 per tonne, from a close of $8,499 after a volatile session on Wednesday, when it touched its highest since February 10 at $8,695.25 before wiping out the gains.
Data from China showed the country's official purchasing managers' index rose to 51.0 in February from 50.5 in January, as export orders bounced back. While China's official sentiment index of purchasing managers and HSBC's private-sector factory data reminded investors of the fragile state of the global economy, it suggested Beijing could avoid a hard landing.
China is the world's biggest consumer of metals, accounting for around 40 percent of refined copper demand last year. "The Chinese (data) was reasonably positive and when you look at more than one day's data the majority of data is reasonably encouraging for north America," said Neil Buston, managing director at ThomsonReuters-GFMS Metals Consulting.
"Obviously you've got the debt issue (in Europe) but the other side of the coin is we're in a low interest rate environment which in theory should boost consumer expenditure and the construction sector in particular," he added. US data out on Thursday clouded the economic outlook, but was not enough to dislodge the view that the world's largest economy was slowly recovering.
Growth in US manufacturing unexpectedly cooled in February and consumer spending was flat in January for a third straight month, overriding the positive impact from jobless claims numbers, which held near four year lows suggesting the labour market is gaining momentum.
"The fundamental story suggests that economic growth is going to be stronger," said Caroline Bain, a senior commodities editor and economist at the Economist Intelligence Unit. "Maybe it is a return to thinking about fundamentals and that the outlook for metals consumption is perhaps better than thought."
"At the moment, the focus is very much on policy decisions but we would note that there are interesting industrial metals specific factors working in the background," Credit Suisse said in a research note. It pointed to cancelled warrants, or inventories already earmarked for delivery, at the LME, which continue to rise. "This suggests that physical demand is higher than many market participants believe. We expect the price path in the coming days to be volatile," Credit Suisse said. "Nevertheless, price risks are to the upside."
Copper stocks in warehouses monitored by the LME fell to a 2-1/2 year low of 292,250 tonnes, down 4,175 tonnes, data on Thursday showed. The ratio of cancelled warrant to total stocks stood at 32.2 percent. In contrast, stockpiles of copper at warehouses monitored by the Shanghai Futures Exchange remained near 10-year highs at more than 216,000 tonnes, despite dropping slightly last week for the first time since early December.
Global miner Rio Tinto said it expected the copper market to stay tight despite growth in supply, with the company anticipating rising costs and supply disruptions to continue, following strikes last year. Rio, which is looking to sell most of its Australia and New Zealand aluminium business, remained bearish on the aluminium market, with smelters facing a margin squeeze as costs rise and aluminium prices remain weak.
Aluminium ended up 0.99 percent at $2,535 a tonne from $2,330 at the close on Wednesday, while nickel ended up 1.27 percent to $19,500 from $19,255. "Nickel had a horrible close yesterday but did manage to bounce off of its 100 day moving average, thus setting the market up for a bout of short covering," RBC Base Metals said in a research note. Tin closed up 0.63 percent at $23,775 a tonne from $23,625 at the close on Wednesday while zinc bucked the trend, ending down at $2,105 a tonne from $2,112 at the close. Lead ended up 0.14 percent at $2,163 a tonne from $2,160.