Copper rose in choppy trade on Thursday as concerns about tight metal supplies and a better performance on US trade outweighed a weak labour market and a warning by the European Central Bank (ECB) that eurozone growth would be slow. New US jobless claims rose unexpectedly last week, further evidence of a weak labour market just hours before President Barack Obama unveils a plan on job creation in a major address to Congress on the issue.
But a much narrower trade deficit for July offered hope for economic growth in the United States in the third quarter, after a sluggish first half of the year. In Europe, the ECB signalled interest rate rises had been halted, and economic growth would be slow at best, deepening concern over the state of the eurozone economy.
Benchmark copper on the London Metal Exchange closed at $9,115 from a last bid $9,092 per tonne on Wednesday. It hit a session low of $9,004 per tonne, before climbing to a session high of $9,160. "The very broad fear is that the economic slowdown may extend for longer than expected," said Credit Suisse analyst Stefan Graber.
A two-day pay strike by workers at Peru's third-biggest copper mine Cerro Verde increased worries about supply constraints. Adding to supply-side worries, Freeport's Indonesia mine workers are set to strike from September 15 to October 15 unless the company meets pay demands.
"Yesterday's rebound showed that the base metals market is still supported by supply tightness and by resilient demand from all Asiatic countries," said Gianclaudio Torlizzi from metals consultancy T-Commodity. "Supporting this view is the fact that central banks in emerging countries have many more tools available in terms of monetary policy compared with developed countries and this, at least for the moment, will make them resistant to the slowdown affecting the US and the EU."
The economic growth worries bothering global markets were further highlighted by an OECD report that warned central banks to brace for weaker growth. The Organisation for Economic Co-operation and Development said on Thursday that developed countries face a sharp year-end slowdown led by a contraction in Germany.
Indonesia's industry ministry said the country may impose a tax or quota on mineral ore exports ahead of a planned regulation to ban all exports of raw minerals by 2014. This will squeeze supplies of metals, including nickel, and support prices. "The Indonesian tax points to a tighter supply picture than previously expected, that is helping to stabilise nickel prices," Graber said.
"Nickel demand has actually surprised on the upside and (stainless) steel production has been more resilient than expected. We are now at a price level where nickel pig iron producers are less competitive." Also pointing to improved demand for the metal, inventories of nickel in LME-approved warehouses fell to their lowest since February 2009 at $99,180 tonnes. This compares with a record high at more than 166,000 tonnes hit on February 2010.
Nickel, used in stainless steel production, closed at $21,050 from $21,775 at the close on Wednesday. Earlier, it hit its highest in more than a week at $22,100 per tonne. "Trading volumes were low, particularly for aluminium, but I don't think there is anything sinister behind that," an LME trader said. "People are just slowly getting back after the summer." Aluminium closed at $2,420 from $2,404 at the close on Wednesday. Tin closed at $24,475 from $24,375 while zinc ended at $2,251 from $2,240. Lead was $2,490 from $2,415.