Copper slid as much as 2 percent on Thursday from a two-week high hit the previous session, as comments from a Federal Reserve official raised investor fears that the US central back might roll back its stimulus programme soon. A weak dollar, however, helped to cushion the losses, making metals priced in the US currency cheaper for buyers outside the United States. The dollar against a basket of currencies hit the lowest level in more than a month.
Benchmark three month copper on the London Metal Exchange (LME) fell 2.1 percent to a session low of $7,300.75 a tonne, before paring losses. It failed to trade in closing open outcry activity, but was bid at $7,334.50, down 1.6 percent from Wednesday's close. Copper on Wednesday touched $7,500 a tonne before closing flat but prices are still down nearly 7 percent for the year.
Richard Fisher, president of the Dallas Federal Reserve Bank, who has advocated that the Federal Reserve scale back its quantitative easing programme, said on Wednesday financial markets have begun to discount this possibility. However, figures on Friday are expected to show the US job growth probably picked up only slightly in May, suggesting the economy is still in a rut and not ready for the Federal Reserve to dial back its monetary support.
Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week, pointing to moderate job growth despite slowing economic activity. "Does the Fed taper or does it continue with its asset-buying programme? This is the million-dollar question," said Societe Generale analyst Robin Bhar. China copper producer Jinchuan Group declared force majeure on partial deliveries after a breakdown, while an appeal was launched against the restart of India's top copper smelter, which was shut in March on pollution concerns.
This comes against the backdrop of suspended operations from mid-May at the world's second biggest copper mine in Indonesia, run by Freeport McMoRan Copper and Gold. Indonesia's chief economics minister called for the fast completion of a probe into the accident that killed 28 people at the site, so that mining could resume quickly.
China's importers of refined copper have stepped up purchases in the past week as banks loosened their grip on funding, while a favourable price arbitrage also supported shipments into the top consumer of the metal. Aluminium closed down 0.4 percent to $1,964 per tonne, the smallest decline of the LME metals. It rose to its highest in almost three months on Wednesday on the back of news that Chalco, China's aluminium top producer, joined other companies in cutting capacity to help trim a market surplus.
Another closure emerged on Thursday when Bosnia's sole aluminium smelter, Aluminij Mostar, said its supervisory board has decided to shut down the plant on June 17 after it had continued to make losses. It has a capacity of 160,000 tonnes a year. "Production cutbacks announced and to some extent implemented so far are in our opinion not yet sufficient to lastingly reduce the high oversupply on the global aluminium market," Commerzbank said in a research note. Zinc shed 1.5 percent to finish at $1,933 a tonne, lead dropped 2.0 percent to $2,201, tin lost 1.4 percent to $20,855 and nickel closed 0.8 percent weaker at $15,095.