US copper futures lost over 1 percent by the close on Thursday after a hefty build in London warehouse inventories raised concerns about demand growth heading into the slower summer months, analysts said.
"I think the build in London was certainly enough to get people's attention, erasing a few weeks of declines and pushing stocks back up above 119,000 tonnes," said Tim Evans, futures analyst with Citicorp Global Markets in New York, adding that the build called the larger trend into question.
London Metal Exchange coppers inventories jumped 5,400 tonnes to 119,600 tonnes on Thursday. Stocks were still less than three days of global consumption, but raised questions about future flows.
"Are stocks just going to keep going up now or are we going to see some of that metal come back out. If it's more or less a one-time transfer of stock and we continue to see some of the deliveries out of the other locations, then traders will become more confidants that inventories overall are still under pressure," Evans said.
The London increase draws closer attention to Friday's weekly inventory data from Shanghai, where stocks have been on the rise. Copper for September delivery fell 3.85 cents, or 1.1 percent, to $3.4025 a lb. on the New York Mercantile Exchange's Comex division, after dealing between $3.3630 and $3.45.
Larry Young, senior trader at Infinity Brokerage Services in Chicago, said the market looked to be setting itself up for another challenge of key resistance at $3.50.
"From a technical standpoint, it has been classic in terms of holding support and building off of that. You're going to see a couple of tests of that $3.50 level before we can close above it and then that will give us the momentum to take out $3.80," Young said. Soon-to-be spot July copper ended down 3.95 cents to $3.4030, while the rest of the board closed in the red, from 1.85 to 4.10 cents weaker.
Final estimated copper futures volumes hit 14,885 lots, against on Wednesday's official count at 13,713 lots. As of June 20, open interest in Comex copper futures rose 539 lots to 78,876 contracts.
Despite the modest price declines a bullish backdrop of unresolved labour disputes in Canada and South America continued to keep the market on edge. Subcontract workers at Chile's Codelco, the world's largest copper producer, planned to meet with company executives to discuss demands for better working conditions.
The workers have threatened strikes across the five divisions of Codelco, which produces about 1.8 million tonnes of copper per year. Also in Chile, workers at Collahuasi, one of the world's largest copper mines, prepared for a strike vote for June 27, while in Peru, workers at Southern Copper Corp's two copper mines and a smelter planned to strike on June 23.
Meanwhile, Strata Plc's Canadian copper refinery (CCR) is running at less than 30 percent capacity, and could be weeks away from hitting its target of 35 percent, the Anglo-Swiss miner said on Wednesday.
The Montreal refinery, which produced about 370,000 tonnes of copper cathode last year, has been working with a skeleton staff since 430 unionised workers went on strike last week. LME copper for delivery in three months closed at $7,445 a tonne, down $65 from Wednesday's close but up from low at $7,405.