Copper slipped on Thursday, weighed down by a firmer dollar after the US Federal Reserve set the scene for a possible interest rate rise and on jitters about China after its stock market retreated. Three-month copper on the London Metal Exchange slid 1.3 percent to close at $5,260 a tonne after rising 0.6 percent in the previous session when prices hit the highest in six days at $5,398 a tonne. Copper has shed about 17 percent so far this year.
The dollar gained after Federal Reserve members on Wednesday left the door open for a rate rise in September, pointing to a strengthening US economy and job market. A stronger US currency weighs on commodities priced in dollars, making them more expensive for buyers using other currencies. "A September interest rate hike remains a possibility and dollar strength is pressuring the metals," said Xiao Fu, head of commodity market strategy at Bank of China International in London. "Sentiment also remains very fragile towards Chinese equities markets."
China shares fell again on Thursday after a report that banks were trying to get to grips with their financial exposure to the stock market slump in June. A rise in LME copper inventories for the second straight day highlighted oversupply in the global market for the metal, used in construction and power. "We're more likely to see prices head lower before they rebound because there is a mismatch between supply and demand and it will take time for supply to respond," Fu added.
Growth in China's manufacturing sector likely steadied in July but remained at a subdued pace, a Reuters poll showed, fuelling hopes that a slowdown in the world's second-largest economy may be gradually bottoming out. "We'll need to see how much more stimulus is thrown at it - if China throws a lot, at the end of the day, prices have to hold - China really needs growth," said Jonathan Barratt, chief investment officer at Sydney's Ayers Alliance.
In a sign consumer demand in China was brightening, bonded copper premiums jumped by $10 to $85, before steadying on Thursday, taking premiums up to the highest since mid-March. In other metals, tin bucked the weaker trend, gaining 0.3 percent to end at $16,190 a tonne after news of disruption to shipments from Indonesia, the world's top exporter of the solder material. Indonesia's PT Timah will be unable to export tin for much of August due to bureaucratic delays in the implementation of new rules for shipments. Nickel, also pressured by oversupply, closed down 2 percent at $11,025 a tonne after LME stocks rose again. Aluminium ended 1.1 percent weaker at $1,643 a tonne, zinc finished 0.8 percent lower at $1,951 while lead shed 0.7 percent to $1,713.