Copper fell for a second day in London, paring this week’s gain, after reports sparked concern about the strength of the recovery in the U.S., the world’s second-biggest consumer of the metal.
Copper yesterday erased a climb to a two-week high and closed lower as the Federal Reserve Bank of Philadelphia reported an unexpected contraction in manufacturing. Separate figures showed that more Americans applied for unemployment benefits, rather than the decrease economists had predicted.
“We are going to see the metals going sideways for a short while, particularly if the macro data is continuing to look a little bit ropey,” said Tom Kendall, an analyst at Credit Suisse Group AG in London.
Copper for delivery in three months slid $65, or 0.9 percent, to $7,240 a metric ton at 10:17 a.m. on the London Metal Exchange. The contract is up 1.2 percent this week. Futures for December delivery fell 1.2 percent to $3.2995 a pound on the Comex in New York.
Inventories of copper tracked by the LME dropped for the fourth time this week, signaling steady demand. Stockpiles shrank 1.7 percent for the week, the most in five weeks and the 26th contraction in a row on that basis.
“From the fundamental perspective, it still looks pretty solid,” Kendall said. “The problem is the market and the shorter-term players from the fund side, who are reacting to the U.S. macroeconomic data.”
The Fed Bank of Philadelphia’s factory index fell to minus 7.7, compared with the median forecast for a gain to 7 from 58 economists surveyed by Bloomberg News. Claims for U.S. jobless benefits jumped to the highest level since November. Still, a report released on Aug. 17 showed that industrial output in the country rose more than economists had predicted.
Copper is on course for a fourth weekly gain in five weeks. Rising prices and lower open interest, or the number of contracts outstanding, suggest that holders of short positions, or bets on lower prices, are exiting the market, according to Leon Westgate, an analyst at Standard Bank Plc in London.
“Copper may be poised for a run higher as we head toward September,” he said in a report yesterday.
Total market open interest advanced to a 17-month high on Aug. 12 and dropped 3 percent over the next three sessions, according to the latest LME data. Copper rose 1.8 percent on the exchange in the same span.
Markets are continuing to improve, and Chinese demand for consumer-related raw materials will gain as the nation’s economy develops, according to Rio Tinto Group, the world’s third- biggest mining company. China is the largest user of the metal.
“Consumer-oriented commodities are beginning to see demand in the Chinese market as a constructive maturation of Chinese economy,” Tom Albanese, Rio’s chief executive officer, told reporters today in Shanghai.
LME copper inventories dropped to 401,725 tons, the lowest level since Nov. 11, according to daily exchange figures. They are down 2.9 percent this month after sliding 8.3 percent in July. Stocks have fallen 20 percent this year, on course for the first annual drop since 2004.
Copper stockpiles monitored by the Shanghai Futures Exchange dropped for the first time in three weeks, falling by 3,499 tons to 110,371 tons.
Orders to draw metal from LME inventories, or canceled warrants, fell for the first day this week, sliding 2.9 percent to 31,450 tons. They surged 53 percent this week, the most in five months.
Aluminum for three-month delivery on the LME fell 0.4 percent to $2,058 a ton. The so-called tom-next spread paid to borrow metal for a day was recently unchanged at $3.50 a ton. Yesterday the spread widened as far as $9, the widest level in 22 months.
The contango, cash aluminum’s discount to the three-month contract, widened to $6 a ton yesterday from the prior session’s $1.75, the narrowest level since March 2007, according to LME data.
Zinc shed 1.2 percent to $2,066 a ton. Two Chinese producers in the south of Gansu province halted output after landslides disrupted power supplies and transport links and damaged facilities, according to researcher Shanghai Metals Market.
Tin dropped 1.5 percent to $20,790 a ton, nickel fell 1.7 percent to $21,435 a ton and lead slid 1.2 percent to $2,079 a ton.