Copper fell slightly on Friday on a stronger dollar and uncertainty over the outcome of a last-chance round of US budget talks, but signs that top consumer China's economy is recovering limited losses. The metal was also supported by reports that workers at the world's biggest copper mine, Chile's Escondida, had rejected an early pay offer, although current contracts remain in force until June next year.
Three-month copper on the London Metal Exchange finished at $7,886 a tonne, down from $7,915 at the close on Thursday. "Copper has held up quite well this week considering the ever closer 'fiscal cliff' story," said Stephen Briggs, an analyst at BNP Paribas. "The single biggest reason is that it had perhaps become oversold compared with the other base metals."
Copper fell almost 2 percent last week and is up just 4 percent so far this year, while three-month zinc has risen 12 percent. But there were signs the economy in China is steadily recovering, with a Reuters survey showing the country's factory activity this month probably expanded at its fastest pace in eight months. The survey showed that the official purchasing managers' index (PMI) in December, due at 0100 GMT on Jan. 1, may have hit 51.0 from November's 50.6.
"The market reacted well to China easing investment restrictions and approving infrastructure programs. That said, Europe is still a mess, and in the US the fiscal cliff is still a question mark," RBC metals director Randy North said. The most-traded April copper contract on the Shanghai Futures Exchange closed up 0.2 percent at 57,680 yuan ($9,200) a tonne, gaining 1.8 percent for the week.
"Shanghai copper has been leading the gains this month thanks to renewed confidence after the leadership transition in Beijing," said Chen Dixi, an analyst at Jinrui Futures in the southern Chinese city of Shenzhen. But Chen cautioned that the initial boom in copper demand may fade as Beijing is adamant about curbing speculative investment in the property sector and shifting the economy away from a resource-heavy pattern of development.
"After all, China is trying to adjust the structure of its economy, and the global economic recovery is far from certain," Chen said. Copper was little changed after mixed economic data from the Unites States. Also putting pressure on copper, top supplier Chile produced 478,545 tonnes of copper in November, up 2.6 percent from a year earlier, easing concerns about dwindling ore grades in many aging deposits.
"This (supply increase) might have a little impact on the market in the near term, but over the longer term copper is still going to be in a deficit and the price reflects that, as it is trading so high above the marginal cost of production," North said. In other metals, three-month zinc ended at $2,052.50 a tonne from $2,102 at the close on Thursday, and nickel at $17,200 from $17,275. Three-month tin was untraded in the final ring but was last bid at $23,300 from $23,400 at Thursday's close. Lead closed at $2,335, unchanged from Thursday's close and aluminium finished at $2,063 from $2,080.