Copper recovers from five-month low

Copper bounced from a five-month low to turn positive on Thursday as the dollar weakened but the metal still looked fragile on fears of slower economic growth and demand from top consumers China and the United States. Copper recovered some poise after China hiked its bank reserve requirement ratio yet again as the market started to think about an end to the country's tightening cycle in China.
It gained in later trading as the euro hit a session high against the dollar after comments made by a European Central Bank policy maker were deemed favouring the single currency. Benchmark copper on the London Metal Exchange closed at $8,725 a tonne from an earlier low of $8,504.50 a tonne, its lowest since December 1. The metal used in power and construction closed at $8,700 a tonne on Wednesday.
The latest lurch lower started on Wednesday after data from China showed industrial output growth eased more than expected in April, pointing to a cooling in the world's second-biggest economy. US data showed the world's largest economy struggled to gain momentum early in the second quarter, with retail sales posting their smallest rise in nine months in April and wholesale prices increasing more than expected. "We're getting concerns about slowing growth, rising inflation, rising interest rates, money leaving the commodities sector," Edward Meir, senior commodity metals analyst at MF Global, said.
China on Thursday hiked the reserve requirement ratio for its commercial banks by 50 basis points, extending its campaign to calm prices, the eighth rise since October. "There is a good chance that the pace of RRR (reserve requirement ratio) increases will now slow. Of course, consumer price inflation is still high, but significant further increases in the headline rate look unlikely," Capital Economics said in a note.
"We therefore believe that the balance of concern within government will shift to the growth outlook and that the People's Bank will call a halt to the tightening of monetary conditions ... in the second half of the year." Copper's close below the 200-day moving average at about $8,760 a tonne on Wednesday is seen as a strong bearish signal. Also in the spotlight are stocks of copper in LME warehouses, which at 467,725 stand nearly 35 percent above levels seen early in December and the highest since June last year.
LME stocks of aluminium at above 4.59 million tonnes are still within touching distance of the record high above 4.64 million tonnes hit in January 2010. But prices for the metal used in transport, packaging and construction, have been supported by financing deals, which are estimated to have tied up about 70 percent of LME stocks.
An additional support for aluminium prices are power shortages in top producer China. Power is estimated to account for about 40 percent of aluminium smelting costs in China. "With the problem of power shortages spreading and worsening in parts of China, it is questionable if the strong production trends across base metals (especially aluminium and lead) can be sustained in coming months," Barclays Capital said in a note.
Aluminium ended at $2,615 a tonne from $2,611 a tonne. Zinc was untraded at the close but bid at $2,140 from $2,160 a tonne, lead was also untraded but bid at $2,305 from $2,295. Tin closed at $29,300 from $29,100. Nickel fell to $23,791 a tonne, it lowest since December 23 on worries about lower demand from stainless steel mills, which account for about two-thirds of global consumption. It was untraded at the close but bid at $24,500 from $24,550.