NEW YORK/LONDON: Copper ended lower Thursday, setting the stage for its worst quarterly performance since fourth-quarter 2008 as macroeconomic pressures continued to dog sentiment and paint an overall bearish picture for demand this year.
For the second time this week, prices broke down below the $7,000 per tonne level as ongoing worries about a potential debt default in Greece, uncomfortably high unemployment in the United States and tighter monetary policy in China withdrew investor confidence and left prices to flounder near their lowest levels in 14 months.
"The most likely direction in the short-term is probably lower given sentiment is still incredibly negative and lots of the question marks remain unanswered, in particular how the European sovereign debt situation will play out," said Gayle Berry, analyst at Barclays Capital.
But a round of better US economic data, renewed supply-side threats in Peru and approval from the German parliament to beef up a rescue fund for the euro zone lifted sentiment, enabling the market to regain its footing above $7,000 by the close.
London Metal Exchange (LME) benchmark copper closed at $7,230 a tonne, only slightly down from a last bid of $7,250 tonne on Wednesday.
In New York, the key December COMEX contract eased 0.05 cent to settle at $3.2460 per lb, after dealing in a wide 20-cent range between $3.08 and $3.2895.
Volumes remained elevated amid the sharp price fluctuations this week. More than 71,000 lots were traded in New York, about 50 percent above the 30-day norm, according to Thomson Reuters preliminary data.
Markets breathed a sigh of relief Thursday after German deputies rallied behind Chancellor Angela Merkel to approve a stronger euro zone bailout fund.
US data later in the day added further support to prices. The number of Americans claiming new jobless benefits fell to a 5-month low last week, while the US economy grew slightly more than previously reported in the second quarter -- both optimistic signs that a recession was not in the cards.
"The data was reasonably positive and the German vote was also significant and this is prompting a bit of a recovery in a number of markets," analyst Edward Meir of MF Global said, adding that the upward trend was likely to be short-lived.
"You are going to have these big swings of direction until we know what is happening with the euro zone."
The start of an indefinite strike at Freeport-McMoRan's Cerro Verde mine in Peru, which produces around 2 percent of the world's copper, provided an additional layer of support.
"Is this the last straw? This is going to be one of the worst years of labor interruptions in the copper sector," said Terry Ortslan, analyst at TSO & Associates, Montreal, with over 30 years of experience in the industry.
"We have had issues in Chile, very significant fundamental issues in Indonesia with Freeport. I think capacity utilization this year is going to be one of the worst in recent memory."
Copyright Reuters, 2011
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