Copper and other industrial metals slumped on Friday in low volumes, pressured by a firmer dollar together with retreating stock and oil markets. Persistent concern about excess copper supply in the second half was also weighing on the market, analysts said. The dollar rebounded, supported by comments from some US Federal Reserve officials in favour of an interest rate hike while oil fell due to weak supply and demand fundamentals.
A firmer dollar erodes the spending power of commodity buyers outside the United States while softer oil prices cut costs for miners, allowing them to accept lower prices. "The dollar is slightly firmer and the somewhat lower stock markets coupled with falling oil prices after the rally of the last couple of days are weighing on the metal prices today," said analyst Daniel Briesemann at Commerzbank in Frankfurt. Benchmark copper on the London Metal Exchange closed down 0.3 percent to $4,798 a tonne after rising 0.8 percent on Thursday and touching a one-month low on Monday.
Copper gained 0.8 percent for the week after two weeks of losses. The low disruption rate for copper mines and the ramping up of new and expanded mines is expected to increase supply in coming months. "Quite surprisingly, copper production seems to be running very smoothly not only in the mines, but especially in the smelters," Briesemann added. Three-month LME aluminium ended down 1 percent at $1,667, pressured by producer selling, further pulling back from a 13-month peak hit on Thursday.
Aluminium has been supported after a slow increase in production among restarted aluminium smelters in China following production curbs last year, causing supply to tighten, said Jackie Wang, analyst at CRU consultancy in Beijing. The risk is when production rises from the restarts and those ramping up aluminium capacity, she said. "When all this production comes to the market, probably by the fourth quarter, that will be a big downside risk for Chinese aluminium prices."
Tin bucked the weaker trend, climbing 0.8 percent to close at $18,540 after tightening supply showed up in LME inventory data. "On-warrant" LME inventories, those not earmarked for delivery and available to investors, slumped to 3,100 tonnes, the lowest since November 2008. Zinc finished 0.4 percent weaker at $2,286 but gained 2.1 percent for the week, the biggest weekly gain in a month. Nickel closed unchanged at $10,355 and lead shed 0.6 percent to $1,883.