Copper fell on Wednesday as weaker-than-expected US durable goods data cast doubt on the pace of recovery in the world's biggest economy, weighing on investor confidence and on the outlook for base metals demand. Copper had rallied about 2 percent on Monday and extended gains to a one-week high of $8,585 a tonne on Tuesday as investors interpreted comments from US Federal Reserve President Ben Bernanke as hinting at further monetary easing.
The drive higher was knocked back, however, by concern about slowing growth in China, the world's leading consumer of metals. Durable goods data hit confidence further and pushed copper to a session low of $8,350 a tonne. Three-month copper on the London Metal Exchange closed at $8,349, down from $8,535 at the close on Tuesday. New orders for US manufactured goods rose less than expected in February, and a gauge of future business investment also fell short of forecasts, Commerce Department data showed.
"On the face of it, the data seems to be consistent with our view of a slight slowdown in investment in the first quarter in the US economy," said Muktadir Ur Rahman, commodities economist at Capital Economics in London. "However, the US economy overall has improved, so we think the investment side of things will improve for the rest of the year."
Prices have gained more than 11 percent this year, but have been stuck in a $8,100-$8,800 range since late January. "Copper is likely to continue to trade in this range or move a bit lower," said T-Commodity partner Gianclaudio Torlizzi.
Copper stockpiles continued to mount in top consumer China, with a pick-up in consumption not seen until after May. "Copper is stuck in no-man's land at the moment," Standard Bank metals analyst Leon Westgate said. JX Nippon Mining and Metals Corp, the parent of Japan's top copper smelter, said on Tuesday the appetite for copper in China remained weak, weighed down by swollen inventories and tight monetary policy, with destocking likely to continue until after May.
China also holds more than 1 million tonnes of commercial stocks of refined copper cathode currently, a level last seen in 2009, due to high imports and weak domestic demand, which may slow arrivals in the second quarter, analysts said. Zinc stocks in warehouses monitored by the London Metal Exchange (LME) jumped to the highest in nearly 17 years on Wednesday, climbing steadily after years of market surpluses.
Stocks of zinc, a metal used to make steel corrosion resistant, jumped by 9,850 tonnes to 898,675 tonnes, the latest LME data showed, which was the highest since May 1995, metals strategists said. "The zinc market has been in a very large surplus for several years now and is looking at another surplus this year. Stocks are generally continuing to build up from already massive levels," metals strategist Stephen Briggs of BNP Paribas said.
Three-month zinc closed down slightly $2,000 from $2,034 at the close on Tuesday. Nickel ended at $17,575 a tonne from $17,785.
The global nickel market was in supply surplus by 7,100 tonnes in January 2012, the latest monthly bulletin from Lisbon-based International Nickel Study Group (INSG) showed. In early October, the INSG forecast a 70,000-tonne surplus for 2012, much wider than the 2011 surplus of 19,300 tonnes. Lead ended at $1,990 a tonne from $1,986 at the close on Tuesday, and tin at $22,425 from $22,600. Aluminium, untraded at the close, was bid $2,169 from $2,196.