Copper prices slipped on Thursday as persistent concerns about the euro zone debt crisis weighed on the euro and uncertainty prevailed about the demand outlook from top consumer China as the country starts to return from a week-long holiday.
Benchmark copper on the London Metal Exchange (LME) slipped to $8,370 in official rings, down 0.8 percent from a close of $8,440 on Wednesday.
The euro lurched lower versus the dollar due to caution as Greece's debt swap negotiations dragged on, with a media report citing Eurogroup head Jean-Claude Juncker as saying the talks with Greece were very difficult.
A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.
Also weighing on prices were questions about short-term demand from top consumer China as the country returns from the Lunar New Year break.
Higher London prices against Shanghai discouraged imports, suggesting that Chinese buyers were not eager to make purchases at these levels.
“The recent price move was in anticipation of Chinese buying beyond the Lunar New Year. I think in the short term, the danger is that people are going to be disappointed,” said Nic Brown, head of commodity research at Natixis.
“Physical (copper) premiums (in China) are coming off, that to me is a clear indication that you have a build-up of copper in bonded warehouses which suggests that the absolute levels of demand in China at the minute are not good.”
The metal used in power and construction rose 9.5 percent in January, its biggest monthly gain in three months.
“For prices to increase further from here, demand indications like physical premia or stocks would in our view need to provide more visible evidence of an improved environment,” Credit Suisse said in a note.
XSTRATA/GLENCORE MERGER
In industry news, miner Xstrata is in talks with Glencore over an all-share merger of equals, confirming reports of a deal that could create a combined mining and trading group worth more than 50 billion pounds ($79 billion).
“The fact that sentiment amongst companies in the commodities sector is positive and that they expect higher prices in the long term is evident from a planned major acquisition in the sector,” Commerzbank analysts said in a note.
“A higher concentration on the producer side is likely to support prices in the medium to long term.”
In other metals, aluminium traded at $2,241 a tonne in official rings, from a close of $2,265 on Wednesday.
Zinc, used in galvanising, was untraded in rings, but bid at $2,110 from a close of $2,131. Tin was also untraded in rings, but bid at
$24,050 from $24,155. Battery material lead traded at $2,215 from $2,235 and stainless steel ingredient nickel traded at $21,000 from $20,975. - Reuters