Copper fell on Friday after poor US jobs data for August fuelled concerns about the health of the world's top economy while the threat of kinks in a constrained supply pipeline provided a floor for prices. Benchmark copper on the London Metal Exchange closed at $9,076 a tonne, down 0.8 percent from a close at $9,148 per tonne on Thursday.
It earlier reached its lowest in four sessions at $9,018 a tonne and remains more than 10 percent below record highs from February. "People were expecting a bad number - but maybe not quite so bad a figure - so you had this knee-jerk sell-off," analyst Leon Westgate at Standard Bank said.
"It continues to paint a pretty ugly picture in terms of some of the US economic health, and follows on from poor European data yesterday. It's not a fantastic backdrop for base metals," he added. US employment growth ground to a halt in August as sagging consumer confidence discouraged already skittish US businesses from hiring, keeping pressure on the Federal Reserve to provide more monetary stimulus to aid the economy. Traders said that with an increasingly uncertain US economic outlook, added to sovereign debt issues in Europe, copper consumers were sidelined with little incentive to buy.
"We think that another liquidity boost could only give a short-term boost to the market, while its efficiency in boosting growth is very doubtful and the Fed is well aware of this," said VTB is a research note. Ahead of a long weekend in the US on Monday, Westgate added that prices could see a short term boost if shorts were forced to cover. Last week, US data for COMEX COPPER showed that the copper market switched to a net short position for the first time since October 2009.
Chile's Escondida copper mine, the world's biggest, said on Friday it had lifted force majeure declared on concentrate shipments late last month amid a two-week strike. With mine output already pressured by declining ore grades, and a lack of new major developments, and industrial action, the risk of bottlenecks has been a key pillar of support for copper.
"Copper is getting tighter and tighter due to supply problems," analyst Daniel Briesemann of Commerzbank said. "Not only strikes but also lower ore grades are cutting production, especially in Chile and Peru." Peru accounts for roughly five percent of global copper supply but it is the fastest growing producer and growing resource nationalism there could add to copper production costs.
Peru's new leftist government plans to send a closely watched proposal to increase mining royalties to Congress in the next two weeks. Although this is unlikely to have an impact in the short term, in the long term this should be supportive for prices as mining royalties may discourage development of new mining projects in the Latin American country.
Aluminium closed at $2,436 from $2,455. Tin ended at $24,250, little changed from $24,245 while zinc, used to galvanise steel finished at $2,195 from $2,239 at Thursday's close. Battery material lead shed 3.5 percent to $2,460 from $2,550 as LME stocks continued to rise, raising questions over demand, LOC. Meanwhile, nickel finished at $21,500 from $21,750.