Copper fell on Thursday after weak Chinese import data cast doubt on demand from the world's top consumer of the metal and data showed jobless claims in the United States rose more than expected. Copper for three-months delivery on the London Metal Exchange closed at $9,191 a tonne, down from a close of $9,275 a tonne on Wednesday.
New US claims for unemployment benefits rose more than expected last week, a government report showed on Thursday, but remained at levels suggesting a labour market recovery is intact. "Copper is off after the jobs data, but I suspect that what is having a far bigger effect today is the Chinese trade data," said Barclays Capital analyst Gayle Berry.
China swung to a surprise trade deficit in February of $7.3 billion, its largest in seven years, as the Lunar New Year holiday dealt an unexpectedly sharp blow to exports. The extent of the slowdown in both exports and imports caught markets by surprise. Asian stocks tumbled on worries that monetary tightening in China and other emerging markets was taking a real chunk out of economic growth. "That data has fanned concerns in the market that a tightening in monetary policy in China is in danger of choking off copper demand growth," Berry said.
Data also showed that China's imports of unwrought and semi-finished copper products sank 35.4 percent in the holiday-shortened month of February. "The Chinese data affected the market but the lack of demand was already reflected in higher LME (copper) stocks and Asian inventories," VTB Capital analyst Andrey Kryuchenkov said.
Although copper inventories on the London Metal Exchange fell 250 tonnes to 425,475 tonnes, they are still about 20 percent up from December 2010. The dollar remained strong, after briefly paring gains against the euro following the jobless claims data, but that was outweighed by a cut to Spain's credit rating. A stronger US currency makes it more expensive for holders of other currencies to invest in dollar-priced commodities.
The higher dollar pushed oil lower, but the focus remained firmly on Libya where escalating violence has sparked concerns that the country's oil infrastructure could suffer lasting damage. "Sentiment is still negative," said an LME ring trader. "There was a bit of buying from Asia this morning but it wasn't enough. If copper goes below $9,200 it may finish badly"
The long-term outlook for copper remained positive due to a production deficit forecast for 2011 but demand for the metal in the spot market is sluggish. Copper's forward curve was in a $18.5 contango - discount for cash over three-month material - compared with a $70 backwardation - premium for cash over three-month material - in December.
"The contango tells you that there is no spot demand," Kryuchenkov said. Zinc, used in galvanising closed at $2,286 a tonne from $2,275 at Wednesday's close. Battery material lead closed at $2,430 from $2,480, aluminium was $2,585 from $2,581 and tin, untraded at the close, was bid at $29,300 from $29,500. Stainless steel ingredient nickel was $26,050 from $26,200.