Copper fell for a second straight day on Thursday, pressured by tepid Chinese buying at the start of the year and expectations of recession in the euro zone and its negative demand implications for industrial metals. In New York, the March COMEX contract fell by 2.75 cents to settle at $3.8060 per lb, after dealing between $3.7735 and $3.8395.
Copper slumped after European Commission interim data showed euro area GDP was expected to shrink 0.3 percent this year compared with a previous forecast for 0.5 percent growth, with the region likely to head into its second recession in just three years. "The outlook for the euro zone economy is weighing on sentiment," said Peter Fertig, a consultant at Quantitative Commodity Research.
"If the euro zone is in a recession and is importing less, this has implications on Chinese exports and Chinese growth, which will impact base metals." Those growth implications in China, which consumes 40 percent of the world's copper, were realised in a preliminary purchasing managers' survey in China on Wednesday, showing export orders falling the most in eight months.
Copper failed to garner much support from news of renewed violence and work stoppage at Freeport-McMoRan Copper & Gold Inc's vast Grasberg mine in Indonesia due to an unresolved issue with the company. "The longer the issue goes on, the bigger factor it will become," Optionsellers.com's Gross said. "The market is still digesting the European news, focusing on the macro. The strike will be something to keep an eye on in the coming days and weeks."
Expectations of a global copper production deficit are supporting prices, but it is unclear when demand will rise, said Germany's Aurubis, Europe's biggest copper producer. Compared with copper, there may be more upside potential for aluminium which has gained more than $100 in less than a week. It was untraded at the close but bid at $2,273, from a close of $2,280, not far from its 200-day moving average at $2,311.66.
"If it broke through its 200-moving day average, it would potentially be quite a strong signal," said ANZ senior analyst Nick Trevethan. "Near-term prospects look quite decent for aluminium. There's reasonable demand from the aerospace sector, and from the auto sector in North America at least and higher energy prices are also supporting the market."