Copper steadies

Copper closed almost unchanged on Thursday, with signs of economic growth in the United States and a retreating dollar balancing concerns about faltering growth in Europe and top metals user China. Three-month copper on the London Metal Exchange closed at $7,211 a tonne, from $7,210 at the close on Wednesday.
The metal, considered a bellwether economic indicator because it is used in building construction and power cables, whipsawed from its lowest since November 24 at $7,131 to a high of $7,342. It is down around 8 percent so far this month. "What yesterday told us was that the markets have turned even more bearish on the macro outlook. What we saw was people becoming more confident of shorting the metals...because people weren't convinced with what happened with the EU summit (last week)," said analyst Gayle Berry of Barclays Capital.
"Unless we get any fantastic surprises on the upside by European lawmakers in the next week, which is doubtful, then I think this strength will prove short-lived." Data showing China's first year-on-year drop in foreign direct investment in 28 months, highlighted the increasing risk to China's growth posed by slowing developed market economies. "There has been vacillation on the economic and political news flow. We've had some mixed data points," said Duncan Hobbs, a senior analyst at Macquarie.
The funding stress that has triggered a sharp sell-off in precious metals is also having an effect on industrial metals. "Since industrial metals are more cyclical, they tend to be even more affected by such adverse financial market conditions," Credit Suisse Private Banking analysts said in a note. London traders said the market was in a sell-the-rallies mode, even in copper which has been better underpinned than other metals given its crimped supply pipeline.
"Short-covering spikes are going to happen, but it's definitely sell the rallies here, definitely copper, last time we were down here we had a lot of Chinese interest - this time, not a squeak," said one LME floor trader. Fears of a shortage of copper have eased somewhat, which will also have a negative effect on the metal's price. Freeport McMoRan Copper & Gold Inc expects full operations at its Indonesia mine to resume by early 2012 after reaching a pay deal on Wednesday to end a three-month strike that paralysed output at the world's second-biggest copper deposit.
However demand remains steady with a large shipment of new orders in New Orleans on Thursday, according to LME data, possibly bound for China. LME copper stockpiles have dropped by nearly one quarter since mid July. "While everyone is worrying about demand, copper mine supply is still struggling," Hobbs said. "I think if and when some of these macro worries moderate and investors focus more on the supply side challenges then copper should respond accordingly."
Among other metals, aluminium closed at $1,975 from a $1,962 close on Wednesday when it sank to a 2011 trough. The poor demand environment has many traders expecting more metal to arrive in LME sheds. Battery material lead closed at $1,975 from $1,998, and zinc at $1,844.5 from $1,845 at Wednesday's close. Nickel closed at $17,895 from $17,400 and tin at $18,600 from $18,525.