LONDON: Copper fell on Friday as investors closed out positions as a precaution ahead of what may prove to be a bearish factory activity report from top metals consumer China and as the dollar firmed.
China's official Purchasing Managers' Index, due out on Saturday, is likely to show that manufacturing activity barely expanded in May, according to a Reuters poll.
Many investors were not taking chances after an initial private-sector PMI survey last week showed a contraction for the first time in seven months, fuelling a sell-off in commodities and equities.
"I don't think anyone is too excited about going into the weekend particularly long," said analyst George Adcock at broker Marex Spectron in London.
"Unless you're a big fund specialising in what you think about China or you're taking a much broader view, you'd likely want to go into the figures neutral and see how the market reacts to them."
Three-month copper on the London Metal Exchange shed 0.9 percent to
$7,250 a tonne at 1420 GMT, extending earlier losses after a survey showed US consumer sentiment at a near 6-year high, leading the dollar higher.
A strong dollar makes commodities priced in the US currency more expensive for buyers outside the United States.
However, losses were cushioned after a second accident in under three weeks threatened to cause a prolonged closure at Indonesia's Grasberg, the world's second-biggest copper mine.
A driver was fighting for his life after his truck was covered in wet muck, the mine's owner Freeport McMoRan said, prompting a union official to call on members to stop work.
This would be the second serious accident at the remote Papua complex in just over two weeks, after 28 people were killed in a tunnel collapse.
Copper is still on track to end May almost 3 percent higher. While copper prices rebounded this month from the year's lows in April, backed by supply outages and improved demand in China, a rally has eluded the metal due to persistent doubts on the outlook for the global economy.
"For a lot of investors, the fundamentals of copper are still not compelling enough to give it a rally that's sustainable," said Sijin Cheng, commodities analyst at Barclays Capital.
"People are still trading it as a reflection of their take on the macroeconomic environment which has been very confusing lately."
LEAD SHORTAGES FUEL PRICE
Lead was the best performer, capping a strong week, climbing 0.6 percent to $2,186 a tonne, the highest in over two months. The battery material was also the top LME performer of the month, climbing by nearly 8 percent as inventories declined.
LME lead stocks fell by another 2,750 tonnes on Friday to 219,475 tonnes, bringing the erosion to 31 percent this year. Lead inventories currently available to consumers, however, are much smaller since 76 percent of the stocks are cancelled, or earmarked for delivery.
The shortage of lead supplies has pushed the benchmark spread into backwardation - in which the cash price is at a premium of $6 a tonne over the three-month price - for the first time in about six months.
"The short end of the lead forward curve has shifted into backwardation for the first time since December, which points to a tighter market situation," Commerzbank said in a note. "The global lead market was already in supply deficit in the first three months of the year."
The weakest performer among base metals on Friday was tin, down 1.2 percent to $20,850.
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